Who doesn’t like making money quickly? Penny stocks have become a go-to for day traders looking to capitalize on quick moves in the market. Even when stocks are down like they were this week, you’re sure to find at least a few cheap names that surge. One of the main trends acting as a catalyst for these moves is what’s known as a short squeeze. Today we take a closer look at a few high short interest stocks to watch under $5.
Penny Stocks TL;DR 30-Second Summary
- Penny stocks are highly volatile on their own without the additoin of other factors like low floats or high short interst
- When stocks have high short interest it suggests certain traders are betting against a stock and in doing so, short it to take advantage of a downward move in price.
- When bullish buying outweighs the selling pressure, it can lead to short squeezes under the right circustances
- Since short squeezes prompt aggressive moves in share prices, money can be made within a matter of days or even hours IE AMC Entertainment, GameStop in 2021
- Today we look at a few penny stocks that can be bought for under $5 right now and have higher levels of short interest
When looking for short squeeze stocks, it’s good to start with the obvious: stocks with higher short interest. In this sense, traders look for companies that investors have bet against. To take advantage of an expected drop in price, these investors short the stock by borrowing shares and selling them into the open market. If they’re correct and the price declines, they’ll repurchase the shares at the lower price and return the loan. That difference in the sale price and repurchase price is their profit.
But when stocks don’t drop and climb, instead, short-sellers still need to repurchase shares to cover the loan. In this case, they’re buying at a premium, losing money, and adding to the bullish action in the market. This is where short squeezes like that of AMC and GameStop can occur.
While not to that extreme extent, it isn’t uncommon to find short squeezes triggering quick moves in the market to the tune of 20%, 50%, or even more than 100% within a single session. When it comes to stocks under $5, just remember, just because they might be “cheap” may not mean they’re the best stocks to buy. You can decide for yourself after reading more on these 3 trending penny stocks today.
Short Squeeze Penny Stocks To Watch
- Stran & Co Inc. (NADAQ: STRN)
- Vertex Energy Inc. (NASDAQ: VTNR)
- Nuverra Environmental Solutions (NYSE: NES)
Stran & Co Inc. (NADAQ: STRN)
Since its IPO debut in November of 2021, Stran & Co has gained a lot of momentum. At the time, STRN stock began trading around $3, and during the weeks to follow, it raced to highs of nearly $7. With most stocks at the end of the year last year, profit-taking put pressure on the penny stock, and a recent prospectus filing seems to have knocked it back into sub-$5 territory. This prospectus relates to 9,967,987 shares of common stock that “may be sold from time to time” by the selling shareholders. It looks like this may have been seen as a potential risk factor for dilution, which is likely why the pull-back ensued.
There’s still plenty to look at when it comes to STRN stock. In particular, the company’s focus on its branding & marketing platform. According to Stran, it services Fortune 500 companies offering loyalty & incentives to branded merchandise and sponsorships. In line with this, Stran just inked a new multi-year deal with a “large nationally recognized” healthcare company. In response to the latest win, Andy Shape, President and CEO of Stran, commented, “We believe the healthcare market represents a significant, yet largely untapped, opportunity to utilize promotional products to help drive positive and healthy consumer behaviors.”
Shape also discussed the future potential of this deal, including driving “significant” revenue and possible expansion opportunities. What’s more, STRN has come into the cross-hairs of traders looking for stocks with high short interest. According to data from Fintel.IO, the percentage of the float short right now sits right around 20%.
Vertex Energy Inc. (NASDAQ: VTNR)
Energy stocks have been red hot lately, and Vertex is no exception. Since mid-December, shares of the company have climbed from under $4 to briefly over $5 this week. Vertex is a specialty refiner of alternative feedstocks. These are mainly used motor oil, where the company supplies Group II+ Base Oils to lubricant manufacturers.
Its latest earnings report prompted some bullishness in the market among analysts. In particular, Vertex reported a big beat on earnings per share. Wall Street expected that to come in at $0.01 while the company reported an actual EPS of $0.11. As a result, firms like Credit Suisse initiated coverage on the company with an Outperform rating and a $13 price target. The firm explained that the prospects for early 2022 could be favorable for the company, citing a pivot to renewable diesel.
As far as short interest goes, VTNR stock is on the list with a short float percentage of 26.82% at the time of this article. Furthermore, other outlets, including TD Ameritrade, show the latest short data (as of 12/15/2021), sitting around 24.25%. Given this, VTNR could be one of the high short interest penny stocks to watch right now.
Nuverra Environmental Solutions (NYSE: NES)
Since the beginning of December, shares of Nuverra have been on a hot streak. At the time, NES was trading at lows of $1.30, and since then, it has reached highs of $4.56. Heading into the second half of this week, NES stock sits around $3, with volume pushing momentum.
The company’s focus on logistics and oilfield services has played well off of the bounce in energy stocks. Nuverra’s suite of services offers oil and natural gas producers a way to meet safety and environmental compliance standards. What’s more, a new acquisition has added to the excitement.
Late last month, Nuverra entered into an acquisition agreement with Select Energy Services Inc. (NYSE: WTTR). This deal adds to Select’s growing list of M&A targets, and with the transaction expected to close this quarter, the clock is ticking. Speculation has also fueled a focus on the short interest in NES stock. TD Ameritrade’s data from December 15, 2022, shows that the shot float percentage on this penny stock is around 26.75%. Whether that is still the case is to be seen but something to keep in mind.
Short Squeeze Penny Stocks To Watch
Short squeezes can be very exciting, especially when it comes to penny stocks. The important thing to remember is that these squeezes can happen quickly. The other thing to remember is that the pullback can be just as aggressive. If you’re looking for short interest stocks to buy, make sure you’ve got a strategy laid out and a keen understanding of how to trade volatile moves.
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