Are you looking for the best penny stocks to buy right now? If you answered yes, then you’re not alone. Each day, thousands of traders hunt for the next big breakout stock to buy with varying degrees of success. But what goes into finding top penny stocks daily? In most cases, a watch list is the first place to begin, which generally entails finding market trends.
Today, we look at several penny stocks with higher short interest. In some traders’ eyes, the significance is that a higher short could mean the higher potential for a short squeeze. It’s never a guarantee that this is the case, but it’s an excellent place to start if this is the trend you’re following.
Short Squeeze Penny Stocks To Buy For Under $5
- 22nd Century Group Inc (NASDAQ: XXII)
- Aridis Pharmaceuticals (NASDAQ: ARDS)
- Joby Aviation, Inc. (NYSE: JOBY)
- Aurora Cannabis Inc. (NASDAQ: ACB)
22nd Century Group Inc (NASDAQ: XXII)
Shares of 22nd Century have been in rally mode for the better part of the last week. The company highlighted the FDA’s actions in banning menthol in ‘nicotine laden combustible” cigarettes in February. The rules are anticipated for publication in April. This is important for 22nd Century based on its core product suite playing on reduced nicotine in its VLN Menthol King. According to the company, this is the only menthol cigarette that “helps you smoke less” and is seen as an “off-ramp” for the current menthol product landscape.
At the end of 2021, the FDA authorized 22nd Century’s VLN reduced nicotine cigarette products. In an MRTP authorization press release, the FDA stated, “In reaching today’s determination, the FDA considered both the current legal status of menthol cigarettes and the available science demonstrating that these particular products could help addicted cigarette smokers reduce their nicotine consumption and the number of cigarettes they smoke per day.” (See: FDA Authorizes Marketing of Tobacco Products that Help Reduce Exposure to and Consumption of Nicotine for Smokers Who Use Them)
Furthermore, the company announced this week that it had secured an organic certification from the US Department of Agriculture for its hemp production at Needle Rock Farms. According to the company, USDA Organic Certification will allow it to obtain premium prices and margins for its hemp biomass.
As far as short interest goes, Fintel.IO data as of today has the short float percentage for XXII stock at 9.11%
Aridis Pharmaceuticals (NASDAQ: ARDS)
Another one of the short interest stocks right now is Aridis Pharmaceuticals. The company specializes in developing therapeutics based on inhaled delivery methods. In particular, its liquid formulation technology is being utilized in advancing its platform to deliver monoclonal antibodies to protect against SARS-CoV2 and influenza.
Earlier this year, the Bill & Melinda Gates Foundation awarded Aridis a grant earlier this year. Fundas will be directed toward evaluating this application in low and middle-income countries. “The combination of dose sparing achieved by inhaled delivery and algae sourced mAbs has the potential to dramatically reduce the cost of antiviral treatment and expand the access of mAbs worldwide,” said Truong.
Following this update, analysts at firms like HC Wainwright took a bullish stance on the company. The firm reiterated its Buy rating at the end of January. It also put a $19 target on ARDS stock. Where does it stand in the mix of short squeeze stocks? Right now, the short float percentage on ARDS stock sits around 29%.
Joby Aviation, Inc. (NYSE: JOBY)
Joby has been one of the companies we’ve discussed throughout the week. The company has gained attention from those on the hunt for “cutting edge” style companies. That’s because it’s making a play at “future tech” and aerial ride-hailing services. Its flagship 5-seat aircraft can take off and land vertically with a 150-mile range and top speeds of 200 mph. Users can access the service via the Joby app or even the Uber app in core U.S. markets.
One of the unique things about this is that it has a high-profile investment fund manager holding a position in the company. Yes, this is one of the Cathie Wood penny stocks held in her ARK Space Exploration & Innovation ETF (NYSE: ARKX). JOBY only makes up 1.21% of the ETF, equating to a position of just over 1 million shares. So it isn’t a massive position. But that is something worth noting if JOBY stock is on your list right now.
Where does it sit among short squeeze stocks? Right now, Fintel data shows the short float percentage sitting around 9.7%.
Aurora Cannabis Inc. (NASDAQ: ACB)
Aurora Cannabis is one of the “OGs” of the cannabis world. It has gone through numerous industry cycles, with the latest taking it to some of the lowest trading levels in years. In fact, a few weeks ago, shares of ACB stock hit fresh 52-week lows of $3.71, leading up to this week’s earnings results.
To the surprise of the market, Aurora was able to regain some composure in its second fiscal quarter of 2022. Following the closing bell on February 10th, the company reported improved EBITDA versus Q1 2022, including $60.6 million in net revenue.
“Q2 total cannabis net revenue held steady sequentially, driven by our industry leading, high margin global medical cannabis business. New international markets are rapidly opening, and with the unique ability to navigate complex regulatory environments, we see a significant revenue opportunity of which we are at the forefront. While the Canadian adult-use market continues to face challenges, we are focused on introducing a new range of products set to launch this spring.”
Miguel Martin, Chief Executive Officer of Aurora.
The biggest question now is will the market react favorably to these results in light of the broader cannabis industry trend? Most stocks have gotten beaten down thanks to uncertainty regarding the political climate and legislative landscape for the industry right now. In addition, it could also be interesting to see if it attracts anyone watching out for short interest stocks. As of today, Fintel.IO data shows the ACB short float percentage sitting around 11.4%.
What Is Shorting
Now that we’ve gone over some of the penny stocks with higher short interest, what exactly is a short squeeze? If you’re new to trading or shorting, you might not know what’s generally involved. So first, what is shorting, and how do you short a stock? Assuming there are shares to borrow when someone wants to short a stock, they will borrow a certain amount of shares from a broker.
The next step is selling these borrowed shares to the open market. Then, if they’re correct in their trading plan, a stock will drop, at which point they’ll repurchase the shares they originally sold at a lower price. The final step for that trader to take is returning the borrowed shares to the broker and pocketing the difference in sell and repurchase price. Ultimately, you need to return borrowed shares if you’re shorting, and the price per share doesn’t matter.
What Happens In A Short Squeeze?
A short squeeze begins with a short but ends with traders repurchasing shares at higher prices. When stocks squeeze, share prices rise instead of fall. Anyone shorting the stock loses money, the higher the price goes. Since there is already an underlying bullish tone in the stock, short covering (buying shares to cover the ones that were borrowed) occurs and adds to an already high level of buying momentum.
This is where you might see very aggressive and speedy runs up in specific stocks. AMC Entertainment (NYSE: AMC) and GameStop (NYSE: GME) were some of the most famous examples of what happens when short squeezes are triggered.
Risks Of Short Squeeze Speculation
Whether you’re building a watch list of penny stocks to buy or simply dabbling in new trends, keep your risk profile in mind. When it comes to squeezes, the moves can happen within the blink of an eye and end just as quickly. So if you’re building a strategy for short squeeze stocks, make sure you’ve got a handle on how to trade volatile stocks.
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