GameStop Corp. (NYSE: GME) is sinking like a rock, having handed back over 89% of its historic 2021 rally. But the door hasn't shut on the short squeeze megatrend ...
In fact, I don't expect this profit play to be going anywhere, despite Wall Street fat cats calling for undue regulations on retail traders.
You see, the window on GME has come and gone, but there are still a ton of stocks out there struggling under a mountain of short interest. Of course, now that retail traders have woken up to the short squeeze method, there are a lot more players to move prices up and down.
So the real question isn't if the short squeeze will still be available to ordinary folks apart from the Wall Street elite - it's how to spot the best among them...
That's why last Friday, I went LIVE on "Markets Live with Money Morning," answering the biggest questions surrounding the short squeeze sensation:
"How do I find stocks being overrun by short-sellers?"
"Once I find them, what do I do next?"
In the video below, I'll show you just what's going on behind the scenes, and I'll give you all the tools you need to play the system like a pro. If you already caught the video, scroll down and check out my answers to viewer questions that came in during the session.
And when you're ready to put all this know-how to work, trading expert Andrew Keene has your first play all lined up...
In fact, before going live with the trade recommendation yesterday, he predicted this to be his biggest "Super Squeeze" win of 2021...
My Complete "Super Squeeze" Toolbox
While watching my live stream, you'll notice there are a few online tools I'll cover - tools that you can use to spot rising short squeeze opportunities.
To make sure you know exactly where to go, here are links to all of the resources at your disposal. Be sure to keep them handy so you can follow along:
Form 13F - Reports Filed by Institutional Investment Managers: Explains 13F filings and what you can expect to find in them.
Form 13F: What has to be filed by managers and how to apply for confidentiality.
SEC Company Search Page: How to search the SEC database for filings.
Latest EDGAR Filings: Most recent filings (under Form Type put 13F).
EDGAR Company Filings - CIK Lookup: CIK is the SEC's Central Key Index used to find corporations and individuals that filed.
High Short Interest Stocks: Culls Yahoo Finance statistics and orders.
WallStreetBets: The Reddit WallStreetBets site.
High Open Interest Screener - Yahoo Finance: Yahoo statistics - how to find the biggest open interest positions.
The Short Squeeze Trading Answers You've Been Waiting For
Here are some questions from my live viewers and some detailed feedback from me.
Q: Do you think SLV will be in play via Robinhood? (Note: Recent Reddit activity threatens a short squeeze on the iShares Silver Trust.)
A: There might be an effort on the part of WallStreetBets to try and squeeze SLV. However, I don't think they're stupid, therefore, I doubt it.
Why wouldn't they? Because if the Redditors are smart (and there are plenty of smart folks in that forum), they'll figure out quickly enough that SLV isn't a stock like GameStop or AMC with a fixed number of shares. It's an ETF - shares can be created easily enough.
The other reason, which not everyone will know or think of, is the price of SLV rises and falls based on buyers and sellers transacting in the shares. So if the Reddit crowd got a lot of people buying SLV to squeeze whomever they think is short (some people say JPMorgan Chase is short silver), that would indeed lift the price of SLV shares.
But it may not have much impact on the price of physical, or spot silver. If the SLV share price rises, the "authorized participants" who create and destroy 50,000 share baskets of ETF shares would simply buy silver on the spot market to create units of SLV, short SLV shares that they know are overpriced, and cover their shorts with the units they just created. In other words, an arbitrage exists there which would negate the effect of trying to squeeze anyone, especially JPMorgan Chase, which is probably an authorized participant.
Q: Were last week's down days the result of hedge funds taking money to cover their shorts?
A: More than likely yes. What was happening was some "degrossing" where hedge funds sell profitable positions to cover losses on their shorts that were getting squeezed.
As they sold, they drove some prices down, and other traders sold too, based on seeing waning profits.
It was a small negative feedback loop, but it's over.
Q: Regarding the Yahoo Finance Statistics page found on each listed stock (see GME statistics covered during Friday's livestream) which of these statistics matter most to trading?
A: Yahoo Statistics are a great resource for you to use in your day-to-day trading.
The left side lists Financial Highlights numbers, which you should always look at and understand what each metric is telling you. That side of the page is great for investing.
The right side is the Trading Information section with shares outstanding, float, short ratio, etc.
Another key number there is dividend payout ratio. I use that constantly when I'm looking at dividend-paying stocks.
Q: Were the data points presented on GME for last month, January 2021, or are they real-time?
A: Yes, they're from January. FINRA gathers the numbers of shares shorted from brokerages on the 1st and 15th of every month, and they generally get posted about eight days later.
So, they are always stale.
There are no real-time calculations on shorts. If anyone tells you there's someone who does that or a site that does it, don't believe them.
Q: If you see high short interest on a stock, do you get in right away or wait for a lower price?
A: There are two ways to answer your excellent question.
Generally, while looking for stocks I want to buy for multiple reasons, I look at the short ratio: If it's high, I like the company, and believe that I'm right and the shorts are wrong, I'll buy the stock...
Because I want to own it, not just to trade it for a possible pop if shorts cover.
I might just buy it or look to see (if I think there's market pressure, or the stock's been weak) if it might drift down to some support where I might be able to buy it cheaper.
Now, with the new retail raiders' game front and center, it's a story you are playing - a narrative - that the stock is ripe for a squeeze.
If you want to get in on that, just buy it. Because if the ball starts rolling and forums are buzzing about buying it and going after short hedge funds, I wouldn't wait, I'd get in.
Then again, I'd be really, really mindful of my timing when playing the new game. Bad timing, meaning you're buying at the peak of short-term runup, will crush you...
I'm not a fan of the new game; I played it the old way. The new game is about social media, and you know how iffy that fake/not fake stuff is on social media.
Q: How do I protect my portfolio from a big correction?
A: You always have an exit plan, a hedge plan, or stops in place on your own trading... Or your finger on the "buy" button of a bunch of inverse ETFs.
Most investors should just ride corrections out. Me, I'm a trader; I like to sell stuff I have profits in, short it on the way down, and buy it back lower. Of course, I rarely get all that exactly right every time.
Q: What happened to your duck?
A: My "pet duck" you may have heard about was actually no pet at all - just a wild, feathery friend that decided to grace me with her presence for a time.
Eventually she flew off to live her life - hopefully she'll come back to visit me next year.
But trust, I still hold that to be one of the most magical experiences of my life.
How to Make a Killing on More Than Just Short Squeeze Stocks
Today, we've covered some of the best practices and tools for trading the short interest motherload. But it's probably no secret to you, this isn't the only headline driving stocks these days...
Before the GameStop short squeeze, we saw another market-shifting change take place: America got a new president.
And before that, Democrats seized majority control in Washington.
And before that, COVID-19 vaccines began distribution to the public.
All of these events had an impact on different corners of the market. And each of them has a hand in where we're headed next...
Right now, we're on the cusp of what I like to call a generational buying opportunity - the world is changing, and with it, a whole new generation of stocks is coming fast.
And for every up-and-coming growth stock charging to the front of the pack, 10 more fall behind.
In this recent lightening-round event, I'm covering some of the top stocks you'll want to have on your radar in 2021, and some of the worst stocks to have in your portfolio right now.
So if you aren't sick of me just yet, you won't want to miss this...
And be sure to have a pen and paper handy, because I'll be throwing you ticker symbols fast and furious.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.