LendingClub Has Major Short Squeeze Potential

After one of the most violent and memorable short squeezes in recent memory sent DryShips Inc. DRYS 9.67% shares soaring from as low as $3.84 to as high as $102.00 in a matter of days, the stock has now crashed back down to earth at around $10.

Learning From DryShips

Following the DryShips reality check, short squeeze traders may be shifting their attention to a new target on Monday: LendingClub Corp LC 2.53%. Shares of the battered marketplace lending stock jumped from a session low of $5.93 to a session high of $6.16 within a matter of minutes on Monday morning following a market rumor of a potential buyout. The stock quickly fell back to around $6.00 when there was no follow-up on the chatter, but the move certainly caught short squeeze traders’ attention.

Short Sellers’ Nightmare: The Buyout

A buyout can be a short seller’s worst nightmare. No matter how well-researched a company is or how confident a short-seller is in the negative fundamentals or technical momentum of a stock, buyout rumors are always a dangerous wildcard.

LendingClub is one of the most popular shorts in the market today at about 17 percent short interest. Short sellers have piled…

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