Large institutions and hedge funds have to file special quarterly reports called a 13F form with the SEC.
The form gives investors and traders a breakdown of which stocks hedge funds are buying and selling, and how many positions they have long or short. The idea is to keep everything nice and transparent.
I used the latest sheet to find out the most shorted stocks right now, meaning the stocks with the highest percentage of short interest.
It’s actually simple. I look at the float, which is public information, and then the 13F. I then calculate the number of short positions to get the ratio. And looking at the most shorted stocks out there right now, GameStop and KemPharm aren’t the only ones to look out for.
And if any of the most shorted stocks see some buying, you’re going to see a huge covering of shorts because all of the short traders are going to buy the stock to cover themselves.
The first name I’d like to walk you through is Luminar Technologies Inc. (Nasdaq: LAZR).
Luminar is a vehicle sensor and software company, and its stock is in what I like to call the twilight zone, or the area between the 50- and 200-day moving averages.
Typically, the shorts will continue until it hits the baseline (around $10 a share for LAZR). But we’re not there yet. I expect the stock price to move a little lower, say the $10 to $15 level, before we see the potential Luminar squeeze take off.
If you look at the stock on an earnings basis, you’ll see that estimates have been low. And stocks that typically have nasty earnings estimates aren’t subjected to short squeezes because most investors and banks don’t think there’s a need to cover the shorts since there’s nothing threatening.
A change in earnings estimates is what tends to increase buying and selling pressure, or change of behavior. In this case, I’m not seeing it at all.
But Luminar isn’t the only short squeeze stock to watch right now. So be sure to watch the video below to get the other four most shorted stocks on my radar, and don’t forget to leave your thoughts in the comments section.
And as always, don’t forget to subscribe to my YouTube channel if you haven’t already so you can be notified as soon as I post my next video!
P.S. I’m willing to bet most traders don’t know there’s a little-known rule causing a glitch in the stock market…
And those who can spot it have the chance to grab double-, triple-, even quadruple-digit gains overnight!
That’s what happened with KNDI when it saw a 2,340% gain…
Luckily for us, Wall Street legend and Forbes contributor Adam Sarhan has found the glitch, and he’s ready to share it!