Short squeezes have been one of the most popular and controversial subjects on Wall Street in recent years. In 2021, groups of Reddit-based internet stock traders made headlines by coordinating targeted buying campaigns to cause short squeezes in several of the market’s most heavily shorted stocks.
A short sale is an investing or trading technique that bets on the price of a stock or other security falling. Short selling involves borrowing shares of a stock or other asset that the investor believes will fall in value.
After that, the investor sells the borrowed shares to buyers willing to pay the market price. Before the borrowed shares have to be returned, the trader is wagering that the price will continue to fall and they will be able to purchase the shares at a reduced cost.
A short squeeze is a big, short-term increase in the share price of a stock that occurs when a large number of short sellers are forced to buy shares and exit their positions at the same time.
According to Wayne Duggan of U.S. News, there are nine stocks primed for the next big short squeezes, as per research done by Ortex Analytics.
Amyris Inc. (ticker: AMRS)
EVgo Inc. (EVGO)
Nikola Corp. (NKLA)
Tattooed Chef Inc. (TTCF)
Cricut Inc. (CRCT)
QuantumScape Corp. (QS)
Compass Pathways PLC (CMPS)
Electrameccanica Vehicles Corp. (SOLO)
Prime Medicine Inc. (PRME)
It is crucial to keep in mind that buying stocks that are in a short squeeze or have a significant short interest can be a high-risk, high-reward strategy. Short squeezes can cause huge price increases, but they can also be short-lived and cause swift price drops. As a result, before making an investment in such short-squeeze equities, investors should do extensive research and take their risk tolerance into account.
According to Faizan Farooque, InvestorPlace, 3 Short-Squeeze Stocks Set for an April Rally are:
Beyond Meat (BYND): Plant-based diets are catching on, but not quickly enough to help out this embattled company.
Nikola Corp. (NKLA): Due to a wave of allegations, the maker of electric heavy trucks is a favorite among short sellers.
Electrameccanica Vehicles Corp. (SOLO): Positive developments in the coming quarters might lead to a short squeeze.
