Penny stocks are shares of companies trading for less than $5 per share. They’re inherently volatile, and they tend to perform unrelated to broader trends in times of market uncertainty. While this isn’t the case for all penny stocks, you’re sure to find at least a few moving inversely compared to significant indexes like the S&P 500 or Nasdaq. With so much selling pressure in the stock market today, the topic of “short squeezes” has begun to increase in popularity.
What Is A Short Squeeze & Why Do They Matter?
Short squeezes occur when traders with heavy short positions are forced to cover their shorts by buying back shares at higher prices. In cases of a short squeeze, there is already bullish buying at hand. In conjunction with short covering, this bullish buying can trigger a snowball effect, which takes stocks rapidly higher.
If you recall, back in 2020 and 2021, we saw mega breakouts of several penny stocks, including AMC Entertainment (NYSE: AMC) and GameStop (NYSE: GME), among other meme stocks. These squeezes resulted in some of the biggest windfalls for retail investors and can be credited for building the new retail “army” that has flooded the stock market over the last two years.
Short squeezes are typically best suited for a short-term outlook. Case in point, neither AMC stock nor GME stock haven’t been able to return to their former record highs. However, those who took advantage of the short-term moves managed to capitalize on the immediate opportunities that those short squeezes offered. How do you find short squeeze stocks? While there are no guarantees that a squeeze will happen, the first step is finding stocks with higher short interest. Today we look at a handful of top penny stocks that could fit this mold.
Penny Stocks To Watch
- Redbox Entertainment (NASDAQ: RDBX) + Chicken Soup For The Soul Entertainment (NASDAQ: CSSE)
- Athersys Inc. (NASDAQ: ATHX)
- Vinco Ventures Inc (NASDAQ: BBIG)
- Mullen Automotive Inc (NASDAQ: MULN)
1. Redbox Entertainment (NASDAQ: RDBX) + Chicken Soup For The Soul Entertainment (NASDAQ: CSSE)
With the fall of Netflix (NASDAQ: NFLX), some traders speculated that other, smaller companies could become players in the streaming space. Would anyone have guessed that Redbox – the same company you can rent DVDs from – would be the company to watch? Whichever side of the argument you’re on, one thing’s certain. RDBX stock has seen a flood of new interest this year. In particular, last month, shares surged to new 2022 highs. Other than attention on Redbox’s streaming business, traders were paying close attention thanks to mounting short interest in the penny stock.
Ultimately, an acquisition bid from Chicken Soup for the Soul Entertainment capped off a hectic few weeks. The combined company is expected to create an independent direct-to-consumer media platform for premium content.
Galen Smith, chief executive officer of Redbox, explained, “This all-stock transaction provides Redbox stockholders with the opportunity to participate in the significant near- and long-term upside potential of a diversified and growing company with greater scale and resources. With our footprint of more than 38,000 kiosks, diverse content libraries, and combined streaming platforms, we will be well-positioned to deliver consumers a wealth of high-quality entertainment options.”
Is RDBX still a short squeeze stock to watch? Considering the proposed acquisition, we looked at CSSE stock for short information. According to data from Fintel.IO, CSSE stock’s short float percentage sits at 23.08% right now.
2. Athersys Inc. (NASDAQ: ATHX)
The biotech company, Athersys, is another one of the penny stocks to watch with high short interest. It has been working on perfecting its MultiStem cell therapy product. This is its stem cell product targeting neurological, inflammatory, and immune diseases. MultiStem is being evaluated as a potential regenerative product for ischemic stroke treatment.
During the first half of the year, Athersys continued enrollment in its Phase 3 MASTERS-2 study of the MultiStem treatment and initiated new trials in Europe and Asia. The company also reached agreements with the FDA and the European Medicinal Agency on the pediatric development plan with MultiStem for the stroke program.
Looking ahead, Athersys could be one of the penny stocks to watch at the end of the month. The company’s CEO, Dan Camardo, participates in the H.C. Wainwright Global Investment Conference on May 24th.
Is ATHX stock a short squeeze stock to watch? Data from Fintel shows a short float percentage of 10.73%. While this isn’t as high as others on this list, it could be something to keep in mind if it’s on your list of penny stocks.
3. Vinco Ventures Inc (NASDAQ: BBIG)
Shares of Vinco Ventures have been on the radar for months. Overall, BBIG stock has failed to reclaim its early 2022 gains. Regardless, it sits on the retail trader watch list as there is a pending spin-off expected.
Last week, the digital media and technology company filed an 8-K showing a date related to a stock purchase deal with an unnamed institutional investor. This came shortly after Vinco announced a record and distribution date for its planned spin-off of crypto company, Cryptyde. May 18th was set as a shareholder of record date, at which time, one share of Cryptyde stock would be given for every ten shares of BBIG stock held. This share dividend is anticipated for distribution “on or about” May 27th.
Given the near-term events, BBIG stock seems to be back in focus. But is it also one of the short interest stocks to watch? It looks like the short float percentage on BBIG stock sits around 15.25%.
4. Mullen Automotive Inc (NASDAQ: MULN)
Shares of EV stocks haven’t been as hot as they were earlier this year. The same trend has held true for penny stocks like Mullen Automotive (until this week). The EV company’s shares surged on Monday after Mullen announced its partner, Linghang Guochuang Group, would be taking their solid-state polymer battery cell technology into vehicle pack level development for Mullen.
David Michery, CEO and chairman of Mullen Automotive. “Scaling from the cell level to pack level development is a major accomplishment, and one I am proud to announce is progressing with LGG as our partner.”
Last week we discussed MULN stock on a list of penny stocks with unusual options volume. At the time, there was significant Call option volume at the $1 strike levels expiring May 20th, May 27th, and June 3rd. Considering Monday’s announcement, the latest bull trend seems uniquely timed. In any case, speculation has also grown following Mullen’s proposal with Thurner Design for developing the Mullen FIVE RS, expected to reach close to 1,100 HP with a 0-60 time (1.95 seconds) encroaching on the Tesla Roadster (1.1 seconds 0-60).
Will all of this news help spark a short squeeze? A lot depends on the actual short float of MULN stock. According to Fintel data, that figure sits just over 16.7%.
Penny Stocks To Watch
In light of recent stock market crash trends, it’s essential to have a game plan before making any trade. Things have been incredibly volatile, contributing to more significant share price swings for specific stocks. Today we looked at a handful of penny stocks with higher short interest. While there aren’t any guarantees of a “squeeze” actually happening, it could be something to keep in mind if any are on your list of penny stocks to watch now.