Short Squeeze Penny Stocks to Watch Before Next Week
Considering the stock market trends this week, volatility is clearly not going anywhere anytime soon. Whether you’re trading penny stocks or higher-priced shares of companies, broad market events have impacted most sectors. But with a bit more optimism lately, some are looking for cues that the bear market is over and opportunities to buy the dip. With so much heavy selling, there are also much higher levels of short interest right now. It isn’t just penny stocks experiencing big bets against them.
Look at companies like GoHealth Inc (NASDAQ:GOCO). You might recall the company was mentioned earlier this month as one of the penny stocks under $1 to watch. Since the article was published, GoHealth completed a reverse split of its shares and now trades at a much higher price.
That hasn’t pushed the pause button on short interest. Currently, according to sources like TDAmeritrade and Fintel.io, the short float percentage on GOCO stock sits well above 80%. This is also a stock priced at $12+.
Many other examples, including stocks trading above $100 per share, like MicroStrategy (NASDAQ:MSTR), have seen an increase in short interest. In addition to the overall market, cryptocurrency stocks have been plagued with bad news and bearish sentiment. Michael Saylor’s company hasn’t been immune to this either. Right now, the MSTR stock short float percentage hovers around 40%.
What Are Short Squeeze Stocks?
Does this mean it’s time to close the book on these names? According to some, it’s quite the opposite. Traders are hunting for scenarios identical to those where bearish bets have built up. The hope is that bullish optimism returns, heavier buying outweighs selling, and then triggers a short squeeze. AMC and GME stocks are examples of extreme situations where short squeezes can result in epic moves.
What are short-squeeze stocks? These are stocks where traders have built higher short positions with an initial plan that share prices will deteriorate. If they’re right, they make money when stocks go down. They do so by borrowing shares of stocks, selling them into the market, and then repurchasing them at a lower price later on to return the borrow. Profit is made when the short seller pays less to buy back the shares they borrowed at a lower price.
If they’re wrong about their trade idea and prices increase, they still need to return their borrow. Instead, they’ll lose money if they have to repurchase shares at higher prices than they initially sold them for. When the “squeeze” gets triggered, this mix of short covering and higher-than-average buying creates a snowball effect in the market, and we see more significant moves.
The critical thing to understand is that short squeezes are typically aggressive but happen quickly. So volatility is usually relatively high. Today we look at a few penny stocks with higher short interest. Will they squeeze? That’s yet to be seen, but the first step in putting together a list of penny stocks that fit these criteria is to identify stocks with higher short interest.
Hot Penny Stocks To Watch
PaxMedica Inc. (PXMD)
The relatively newer public company, PaxMedica saw an explosive first day of trading earlier this year but has since come under pressure with PXMD stock dropping as low as $1.36. Since hitting those lows, the biotech penny stock has pulled an about-face thanks to a recent string of news and upcoming events stoking speculative trading.
Last month the company announced entry into a purchase agreement and rights agreement with Lincoln Park Capital Fund for up to $20 million. PaxMedica earmarked the use of any proceeds for working capital to support its growth. This week, PaxMedica presents at the Benchmark Company’s Discovery One-on-One investor conference. With that as the backdrop some are looking for reasons to add PXMD stock to their watch list.
One of the additional things factoring in is the PXMD stock short float. TDAmeritrade shows this figure sitting just a hair under 40%.
Blue Apron Holdings (APRN)
One company that likely needs no introduction is Blue Apron Holdings. The meal kit stock saw a massive move in the stock market earlier this year. A mix of heightened attention from the retail community, higher short interest, and broader market momentum helped spark a big move in APRN stock.
The company recently partnered with DreamWorks Animation’s Puss in Boots: The Last Wish. The collaboration will see Blue Apron provide a “family-friendly menu inspired by the movie.”
“Over the last year, we expanded our strategic partnership ecosystem to include incredible, like-minded collaborators like DreamWorks Animation,” said Amber Minson, Blue Apron’s Chief Marketing Officer. “Puss in Boots is a well-known film with beloved characters, and we saw a great opportunity to create a ‘dinner and a movie’ experience for customers and fans of all ages to enjoy.”
As far as short interest is concerned right now, a few outlets peg the value at higher levels. Both TDAmeritrade and Fintel show an APRN stock short float percentage sitting above 40%. TD’s data has it the highest at 47%.
Bed Bath & Beyond (BBBY)
Another one of the meme stocks to watch this year was Bed Bath & Beyond. One of the most significant moves came at the end of summer, where a mix of highly speculative trading action based on rumors, short interest, and a history of bigger breakouts prompted a move all the way to highs of $30.
November has been a month where Bed Bath & Beyond has worked to streamline its books. It shed over $120 million in debt via a share swap. The company also announced new management appointments, including a new CTO and CMO. Some concerns have risen as the holiday season gets into full swing. Reports from The Wall Street Journal expressed concerns that Bed Bath & Beyond was struggling to attract customers because it couldn’t stock up its US stores.
While the company works to rebuild heading into 2023, investors have taken out bearish bets against it. As of this article, TD Ameritrade’s short float percentage on BBBY stock is around 40.07%.
Opendoor Technologies (OPEN)
Real estate stocks and related company stocks have been in and out of favor throughout the year, thanks to the state of the real estate market itself. Opendoor provides an eCommerce platform for residential real estate transactions and has been under pressure in the market since the start of 2022.
In its third-quarter earnings update, CEO Eric Wu discussed the projections for the company explaining, “In the third quarter, we accelerated the resale velocity of our existing inventory and have significantly increased spreads on new acquisitions…These actions ensure we are prioritizing sell-through to improve the health of our inventory on a resale basis and that our post-Q2 acquisition cohorts are positioned to perform inline with our contribution margin targets.”
OPEN stock isn’t topping the list of stocks with the highest short interest. But it does have some notable short float percentages right now. Both TDAmeritrade and Fintel show this figure sitting around 13% as of this article.