Whether you’re trading penny stocks or higher-priced shares of larger companies, there’s no denying that new and more frequent trends have come to light. Thanks to the huge move in “Ape stocks” during the pandemic, traders are becoming more and more familiar with things like “short squeeze stocks” or stocks that have seen big bearish bets made by those expecting a more significant move lower.
What Is Shorting & How Can You Capitalize On A Short Squeeze?
Shorting in the stock market refers to the act of betting against a company’s stock. Traders will borrow shares of the company from a broker and sell them on the open market. The hope is that they can buy them back at a lower price to return the share loan to the broker and make a profit on the difference.
A short squeeze happens when investors who have shorted a stock are forced to buy shares to cover their positions. It’s often due to unexpected positive catalysts or speculation about the company. This buying activity can lead to a sharp increase in the stock’s price, creating a feedback loop that puts more pressure on short sellers.
Investors who have purchased shares in the company before the short squeeze can benefit from the price increase. Additionally, investors who identify companies with high short interest and believe that positive news or a sudden shift in market sentiment could trigger a short squeeze can position themselves to potential profit from the event.
However, short squeezes can also be unpredictable and volatile, making them a high-risk, high-reward investment strategy. The first place to begin building a short squeeze penny stocks watch list is by identifying high short interest in companies. This article takes a look at a handful of cheap stocks with that trait.
Biotech Penny Stocks To Watch
Karyopharm Therapeutics Inc. (KPTI)
The stock market might be down today, but plenty of penny stocks are heading higher. Karyopharm Therapeutics is a commercial-stage biotech company developing treatment candidates for cancer. Its pipeline includes candidates like its lead XPOVIO candidate, which is approved in the US and is being marketed in various indications. Its pipeline has placed a focus on multiple myeloma, endometrial cancer, myelodysplastic syndromes, and myelofibrosis.
At the end of February, Karyopharm and Menarini Group received full marketing authorization from the UK Medicines & Healthcare Products Regulatory Agency for its platform. Marketed as NEXPOVIO in the UK, the decision extended the treatment’s indication in Great Britain, and the conditional marketing authorization was converted to full approval. NEXPOVIO is being combined with bortezomib and low-dose dexamethasone for patients with multiple myeloma.
Something that may have become a source of speculation is an upcoming conference. Karyopharm will participate next week at the Barclays Global Healthcare Conference. Regarding short data, Fintel shows this sitting at around 19.59%.
Cingulate Inc. (CING)
Another one of the biotech penny stocks to watch this week was CingulateInc. The company uses its Precision Timed Release delivery platform to advance a pipeline of pharmaceutical products. Last month the company announced positive top-line results from its CTx-1301-003 study. It assessed the effect of food on the absorption of its lead candidate CTx-1301. The investigational extended-release tablet formulation of dexmethylphenidate targets attention-deficit/hyperactivity disorder (ADHD).
“We are developing CTx-1301 to be the first true, once-daily stimulant medication that treats ADHD over an entire active day, and crucial to this is ensuring a pharmacokinetic profile customized for the unique attributes of stimulant medications and ADHD, regardless of food intake,” said Shane J. Schaffer, PharmD, Chairman and CEO, Cingulate. “The results of this study are instrumental in confirming that we have identified the optimal formulation of CTx-1301, paving the way for our Phase 3 trials.”
There are plans to begin a Phase 3 trial later this year in pediatric and adolescent patients. That news sent CING stock exploding higher at the end of February. Heading into the rest of March, the market seems to have focused on its short interest. That sits at around 13.28%, according to data from TDAmeritrade.
PaxMedica, Inc. (PXMD)
One of the short-squeeze stocks that have been on the radar of retail traders frequently is PaxMedica. According to data from Fintel, the short float percentage on PXMD stock sits at around 24.25%. The company has been presenting its anti-purinergic drug therapies platform for treating intractable neurologic symptoms.
In its last shareholder letter, the market caught a glimpse of its plans for 2023 after 2022’s milestones. Specifically, CEO Howard Weisman explained, “PaxMedica’s most important objective is to initiate PAX-101 (suramin) clinical trials for the treatment of Autism Spectrum Disorder (ASD) in the U.S…One of the most critical steps in this process is a Phase 3 trial for HAT-301, that we initiated in November. This trial, which uses existing retrospective data that PaxMedica has exclusively licensed from key hospitals in Malawi and Uganda, is expected to advance PAX-101 towards FDA submission for the treatment of Stage 1 Trypanosoma Brucei Rhodesiense Human African Trypanosomiasis…We expect final results for the HAT-301 study in the second half of 2023.”
Against this backdrop and with a focus on short-interest stocks, PXMD has gained some added attention in the stock market this week.