Try This When Momentum Turns Green And Thank Me Later

High short-interest stocks become great speculative swing trades when momentum swings positive. While these companies could wind up bankrupt at any moment, a sudden change in market conditions can make them skyrocket.

Lately, China has been expanding liquidity into the system to support its struggling economy and currency. When financial conditions expand, risk assets take off.

So, don't be surprised by the sudden improvement in momentum on the S&P 500. With China supporting their economy we could go green at some point this week.

If you’re a speculator, this change in momentum tends to accompany the onset of a short squeeze. Fundamentals go out the door when liquidity expands in the global financial system.

It doesn’t matter if the stock has a high price-to-sales ratio or if it’s a profitable company.

All that matters is the rush of shorts covering their positions… Then, buyers try to force their hand.

Just look at any stock on this list from highshortinterest.com.

For example, Beyond Meat (BYND), hands down one of my least favorite companies in the world...

There were two big momentum events this year that aligned with easing by the People’s Bank of China. They were on Jan. 3 and May 31.

BYND shares popped from roughly $12 to $20 in January, after the Chinese central bank eased. And in June, shares popped from about $10 to more than $18.

Remember, Beyond Meat is completely unprofitable. It’s bleeding money. But the short float ratio is 36.8%, meaning that there is a significant amount of shares facing bets against them… 21.57 million, in fact.

So, that can lead to an outsized rally as short sellers cover. You just have to follow the money and know whether it’s expanding or not.

Yesterday, during a live session with Flashpoint Elite members, we explored the $12 BYND call option set to expire this Friday. At the time, it was priced at .30. Then, reports of further action from China to support its economy caused BYND and many other names from highshortinterest.com to squeeze–The $12 call ran to $.57. This is a perfect example of catching a squeeze at the right time when capital conditions improve. 

If you're eager to capitalize on the next big short squeeze, keep an eye on my momentum signal. When you see it switch from red to green, pick your least favorite stock with a high percentage of shares sold short and take a shot. Then check back in with me and let me know how you did. If timed right, you stand to profit handsomely.

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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