If you’re like most penny stock traders, you try to make money when stocks go up. But there are ways to make money when they drop as well. To take advantage of such a move, traders short these stocks. They’ll sell borrowed stock at market prices, then repurchase the same amount of shares after a stock drops to return that loan.
Seems easy, but what happens when stocks don’t fall and rapidly rise instead? This is where a short squeeze can trigger, which can mean big money for traders who know how to handle volatility. It all starts with finding penny stocks with higher short interest, and today we look at 4 of them.
I briefly described shorting in the paragraph above, and it sounds simple. The money is made between the selling price and the repurchase price. The lower the stock drops, the larger the spread and therefore the more money you can make. Remember that anyone shorting stocks needs to return the same amount of shares that they borrowed. The price per share doesn’t matter as long as the loan is covered.
Instead, when stocks don’t drop and rise, that can mean trouble for short-sellers. In this case, they still need to repay their loan, but now they’ll take a loss. The repurchase price is higher than their original selling price. The higher the stock goes, the more losses that these sellers incur.
This is why short selling has infinite risk. In theory, stocks can only drop 100%, but they can rise infinitely. In a perfect storm, short-sellers scrambling to buy shares at higher prices will add to the overall bullish market action and compound an uptrend’s momentum.
For instance, we discussed Reliance Global (NASDAQ: RELI) as a stock with higher short interest back when it was still under $5. Lo and behold, RELI stock ultimately experienced a short squeeze, and shares have rallied more than 320% since. Today we look at three more penny stocks with higher short interest. Will they become the next “squeeze” candidates?
Short Squeeze Penny Stocks To Watch
Penny Stocks To Watch 1. KLX Energy Services (NASDAQ: KLXE)
Energy stocks have been on fire recently. Thanks to the global economic reopening trend, oil and gas are in high demand. With that comes more need for services companies. KLX Energy, for example, offers support for oil and gas production companies. Whether drilling, production, or intervention activities, KLX offers services and support facilities across the US.
What To Watch With KLXE Stock
Other than industry momentum, there are other things to keep in mind with KLXE stock. Specifically, company growth will likely be a focal point. This is because the company is coming off a solid Fiscal 3rd quarter. The company’s EPS increased year over year while sales beat estimates by a much wider margin ($139m V.S. $109m exp). Additionally, management expects a strong finish to 2021.
In its last quarterly update, Chris Baker, President and Chief Executive Officer of KLXE, stated, “Looking forward, we believe the market remains constructive for KLXE despite recent headwinds. We expect improved pricing and activity will continue to drive positive results, with pro forma calendar fourth-quarter revenue expected to be between $140 million and $145 million, which would equate to a sequential revenue increase of approximately 9% to 13% when compared to the calendar third quarter.”
Is KLXE A Shot Squeeze Penny Stock?
Using the most updated data from Fintel.IO, we can see that the short float percentage on KLXE stock sits at around 18.6%. It’s also a higher figure than the same period one month ago.
2. Senseonics Holdings, Inc. (NYSE: SENS)
Shares of Senseonics are trading higher to start the week, though not by much. The biotech company has been in and out of the spotlight as it approaches a pivotal event with the FDA.
Its Eversense Glucose Monitoring System is awaiting approval. In a January business update, Senseonics stated that it expects a decision from the Administration in the coming weeks. Since roughly two weeks have passed following the update, the market has begun speculating.
What To Watch With SENS Stock
Tim Goodnow, Ph.D., President and Chief Executive Officer of Senseonics, explained this month that “the FDA is at full capacity managing the backlog of COVID-19 related filings creating longer than expected review timelines. We are confident a decision regarding approval of the 180-day system will be made in the coming weeks as the FDA continues to clear out the backlog.”
Without a specific date given, the market awaits this final FDA outcome.
Is SENS A Short Squeeze Penny Stock?
Fintel data shows SENS stock’s short interest is slightly lower right now compared to 1 month ago. Regardless, that short float percentage still sits around 24%.
Penny Stocks To Watch 3. SeaChange International (NASDAQ: SEAC)
SeaChange is another one of the companies awaiting a formal outcome of a recent update. With the move to “alternative social media” sites that arent’ Facebook or Twitter, companies are looking to enter the public markets and capitalize. The popular platform TikTok has managed to bring more hype to short-form videos, and with that, other companies are gaining market share. One of these companies is Triller, and via a proposed deal with SeaChange, it could be the next social media penny stock to watch.
What To Watch With SEAC Stock
Last month SeaChange confirmed entry into a definitive agreement and merger plan with Triller Holdco to advance digital advertising with TrillerVerz. According to the company, this deal is expected to result in a combined company valued at roughly $5 billion.
Since the deal is expected to close this quarter, the market remains speculative. Once finalized, the company will change its name and symbol to TrillerVerz Corp. and ILLR.
Is SEAC A Short Squeeze Penny Stock?
SEAC comes on this list of penny stocks with a lower short float percentage. Regardless, it could also be one to watch as this figure sits much higher than last month, at 13.69%.
Are Short Squeeze Stocks Right For You?
There are plenty of stocks with high short interest, but there’s no guarantee that any will “squeeze.” Even with that as the case, there’s a reason you’re looking for them right now. If or when a short squeeze is triggered, it’s vital to know how to handle volatility and risk.
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