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- There are stocks with high potential for a short-squeeze as some stocks get crowded with bearish investors.
- An ongoing stock market rally has elevated mark-to-market losses on the short side that may force some short sellers to exit their positions.
- These are the 10 stocks that are most primed for a potential short squeeze, according to S3 Partners.
The stock market’s near 20% rally year-to-date has boosted some beaten down stocks that have a high level of short interest.
That could set the stocks up for a potential short squeeze as some bearish investors throw in the towel and exit their losing short positions by buying back the stock, helping increase the price, according to a Wednesday note from S3 Partners.
Such short-squeezes were prevalent in 2020 and 2021, as shares of GameStop and AMC Entertainment staged eye-popping rallies not based on the underlying fundamentals of their business, but on short-sellers rushing to cover their losing trades.
“The US market has risen substantially over the last 30 days which has made short positions more crowded and more squeezable as the mark-to-market value of shorted shares increase,” S3 Partners said. “Mark-to-market losses on the short side may force some short sellers to trim or exit their positions.”
S3 Partners identified stocks that have all the characteristics of a potential short-squeeze, including high borrowing costs, high unrealized losses for investors betting against the stock, and high short interest.
The notional dollar amount of the short interest measures the collective value of bearish investors’ short bets against a certain stock. The amount of short interest could ultimately turn into buying pressure for the stock if a short-squeeze is triggered.
These are the 10 stocks that are most primed for a short squeeze right now, according to S3.
10. Riot Blockchain
Bitcoin has tumbled in 2022 but JPMorgan has warmed to the asset.
Short Interest: $438.8 million
9. Marathon Digital
Photo by Getty Images
Short Interest: $445.0 million
Vehicles are displayed at a Carvana dealership in Austin
Short Interest: $485.0 million
7. Upstart Holdings
Short Interest: $500.0 million
6. TG Therapeutics
A biotech lab.
picture alliance/Getty Images
Short Interest: $591.7 million
5. AMC Entertainment
Short Interest: $749 million
Michael Saylor is facing a $100 million lawsuit for tax evasion
Marco Bello/Getty Images
Short Interest: $1.12 billion
A young man walks into a GameStop video game store in San Rafael, California. GameStop (GME) is among the most high-profile meme stocks.
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Short Interest: $1.32 billion
File photo of a CarMax dealership in Duarte, California
Short Interest: $1.80 billion
Coinbase announced last week that it plans to rescind job offers and freeze hiring indefinitely.
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Short Interest: $2.71 billion