Forget earnings reports and buyout announcements. If you’re looking for the most powerful catalyst in the stock market, short squeeze stocks frequently skyrocket exponentially higher in a matter of days.
Within the past couple of months, there have been several examples of 1,000% run-ups in big-board-listed stocks. Traders don’t delve into the sketchy world of OTC-listed penny stocks to make massive short squeeze gains overnight.
Back in November, DryShips Inc. (NASDAQ:DRYS) underwent an epic short squeeze that sent shares skyrocketing from under $4 to over $100 in a matter of days. EnteroMedics Inc (NASDAQ:ETRM) shares surged 1,370% in the first six trading days of 2017.
Short squeezes can be extremely difficult to predict and extremely difficult to time once the big move has begun. However, there are two key ingredients in the recipe for a massive short squeeze: high short interest and a low float. There must be enough short interest in a stock to trigger a short covering frenzy. At the same time, the stock must have relatively few shares available for short covering, which can create a bidding war among traders looking to cover
Here’s a look at three stocks that could be the next huge short squeezes.
Short Squeeze Stocks to Watch: DryShips (DRYS)
Unbelievably, DryShips stock may soon be primed for an even larger short squeeze than the one it experienced in November. This week, DRYS announced that it will be undergoing yet another in a series of reverse stock splits as the company tries desperately to maintain its Nasdaq listing and avoid bankruptcy. The announcement sent shares plummeting more than 36%.
The 8-for-1 reverse split will go into effect on Jan. 23 and it will divide the minuscule DRYS float even further. According to the company, the number of shares outstanding will be reduced to about 8.7 million, but the stock’s float is only a small fraction of that number.
According to Yahoo, DRYS currently has a float of about 1.1 million, meaning the post-split float will be roughly 137,500. There are currently 1.8 million shares held short. After the reverse split, that number will be cut to 225,000. It still represents a short percent of float of well over 100%.
With such a tiny float and a massive short interest, DRYS remains a short squeeze ticking time bomb.
Short Squeeze Stocks to Watch: Cesca Therapeutics (KOOL)
Cesca Therapeutics Inc (NASDAQ:KOOL) is…
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