Everyone is talking about how GameStop, a perennially beaten-down video game retailer, has rocketed to the moon… and back… and to the moon again on a short squeeze.
Folks, it’s already been a wild week on Wall Street and we’re not even halfway done yet!
Heck, even Tesla CEO Elon Musk is getting in on the fun!
— Mr. Tweet (@elonmusk) January 26, 2021
GameStop Corp. (NYSE: GME) is a favorite target among short sellers. And at the time I filmed this video, it had a short interest of 131%.
Short interest is a fairly simple formula where you take the number of shorted shares and divide by the number of shares outstanding. So say a stock has 1.5 million shorted shares and 10 million shares outstanding. The short interest would be 15%.
The GameStop Short Squeeze Explained
So there is a massive amount of shares in this GameStop short squeeze. And when you see a stock chart go parabolic — when the price goes straight up a huge amount — that’s an indication the shorts are getting crushed.
Traders who are short on the stock then have to start aggressively buying shares to cover their positions — they’re forced to buy — and this GameStop short squeeze example is among the best you will ever see.
And it will probably continue for a few more days, maybe even a couple of weeks.
Eventually its share price should fall back into its normal range, which is $18 to $20 for GME. Even if it drags on for weeks, you’d still see lower and lower highs than that initial moon shot because once a short is covered, there are less shorts out there.
But while GME is a favorite among short sellers, it isn’t the only one.
While news of the GameStop short squeeze has captivated Wall Street, which is great, here’s the best part for you…
I have five stocks I want to bring to your attention that also have high open interest. And they are tempting fate in similar fashion as GameStop, which means they could explode higher and deliver big gains to shareholders before the short squeeze happens.