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If you've been with me for a while, you know that my S.C.A.N. algorithm looks for all kinds of unusual options activity; it helps me make recommendations for my subscribers.
But I've made some tweaks to it recently that have it looking out for what I think are the two most predictable indicators of a potential short "Super Squeeze" about to explode.
That usually means a short-selling Wall Street hedge fund is about to be in hot water, but for regular investors smart enough to be on the "other side" of the squeeze, these situations can be extremely lucrative.
You can find yourself holding a stock that, all of a sudden, is on a powerful bullish run.
I typically share a watchlist with my Super Squeeze Profits readers every week of the stocks S.C.A.N. has hit on as potential winners - I'll make specific trade research recommendations for them.
The hunting is looking really good this week, and I want to share a few of these names with everyone...
Why "Super Squeeze" Situations Happen
Most folks, when they think a stock's going to go higher, up and buy the stock. When they get into trading, they may trade call options. On the other hand, when they think a stock is going to go down, most folks would think to buy put options and "go short."
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Now, there's being "short," and then there's "short-selling" - that's something a lot of regular investors and traders just don't do very often because the risk is theoretically unlimited. It's typically a game for big institutional investors because of that risk; there can be steep margin requirements and/or really deep pockets required.
I'm going to oversimplify here, but basically, a short-seller will go out and borrow the stock in hopes that it will go down in price. When the time comes to "return" the shares, they pocket the difference as profit.
But like I said a second ago, short-sellers can find themselves in hot water. It's really easy for short-selling to go wrong in a hurry. Lately, big hedge funds have found themselves in deep trouble, as we saw with GameStop Corp. (NYSE: GME).
If there's significant, upward buying pressure on a stock, those short-sellers will have to "cover" their positions fast - they cover them by buying the stock, which drives the price up more, which forces other short-sellers to cover and buy, which drives the price up, which attracts other buyers with "FOMO," which drives the price up...
Everyone's got a different pain point, and not every short-seller will move to cover at the first sign of buying - some hedge funds covered their GameStop shorts at $90, others significantly higher - but sooner or later, when a "Super Squeeze" breaks out, they all cover and buy.
So as you can see, a "Super Squeeze" is a fast spiral of buying; a chain reaction. And of course, if you're long at the beginning, you stand to bag big, rapid profits from these kinds of events.
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And if you're trading the right kind of options on the stock, those profits can potentially be extraordinary.
Some of the Top "Super Squeeze" Contenders This Week
S.C.A.N. has hit on several likely candidates for big future profits, and like I said, I'll be making some specific recommendations on those for my readers.
But I'd encourage everyone to keep an eye on these - watch for the moves that can signal a squeeze unfolding.
Macerich Co. (NYSE: MAC) - this is a real estate investment trust (REIT), and a really big one. In fact, it's the third-largest owner and operator of shopping centers in the United States. The short-sellers here almost certainly sense pandemic-era weakness lingering on here and are hoping to capitalize on that weakness, but I think - and S.C.A.N. agrees - it's waaaay too late for that. I think this REIT could go higher, far outpacing the recovery that's unfolding right now.
We're also looking at Nautilus Inc. (NYSE: NLS). That's a classic name if you're into fitness - it makes Bowflex, Nautilus, Octane, and Schwinn fitness machines. This niche did extremely well during the stay-at-home phase of the pandemic, but like a lot of other "pandemic stocks," NLS has fallen more than $10 from its February highs - Wall Street is looking to cash in on that. What they don't seem to know is, I don't think this stock has further to fall; it's looking like an all-upside situation from here, which would absolutely demolish the short-sellers at these levels.
You can go right here to learn how to get all of my Super Squeeze Profits research and recommendations every week. You'll be able to see for yourself how individual investors turned the tables on Wall Street and why a lot of regular folks think the "Super Squeeze" is the market's hottest trade right now.
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About the Author
Andrew Keene is a globally known trader and a renowned expert on all things options.