One of my absolute favorite things to do is go to the library and check the bi-monthly updated Short Interest Analysis on the Bloomberg Terminal—there were some amazing trades from the top shorted stock list back earlier in the year: DM, MPW, GM, RIG, and BYND, just to name a few. And with the combination of an overly-shorted stock with the right chart setup, it can really be amazing to see how much the stock can move, especially if it has a lower share count (bonus if there’s a low free-float for the high volatility traders).
I was honestly in shock to see the big moves from some of these plays and am moreover excited for what’s to come in the markets regarding reversals in some heavily-shorted names that traders have been patiently trying to bottom for what seems like forever.
With May already 5 trading days in and Q2 in full effect, I am wondering if things can rotate into some beaten down names that are IMHO just getting started on the macro (albeit some are up a lot on the micro).
While identifying these setups I am using a few different factors, but first and foremost is finding a heavily-shorted name, then turning on the 10, 50, and 200-day Moving Average and Volume indicators on my chart while looking at the daily time frame for entry and exit targets along with analyzing daily vol to try and predict movements.
Ideally the setup is a bullish reversal that is closing above a major moving average. In addition, I am looking for crossovers and potential golden cross breakouts (like with HIMS earlier in the year).
SOUN
SOUN was an incredible trade at the beginning of 2024 but had a rather disappointing downtrend from the $10.25 highs up until the end of April. Recently it has found support above the 10-day MA which caught my attention to trade back to $5.52 aka the 50-day MA. On 5/6 it had a surprise day ranging from $4.52-5.39. It did not quite close above the 50-day today and might even reject back to $4.42, but I have to say I am leaning towards a move to the $6s as early as 5/17. Keep an eye on it above $4.42 and to make $5.52 the new support.
SOFI
SOFI just cannot catch a break in 2024. At the end of 2023 there was that incredible run from $6s to almost $11, but in the end could not surpass $10.50s. Ever since it has not been able to get back above $9. It does seem to have a strong support above $6.40 (the original entry from the 2024 run), so as long as it holds there I am cautiously bullish. If it can break and hold above the 10-day MA $7.25 and make $7.50 support, I would be interested in swinging back to $8-9. This is one of the 4th shorted stocks on the entire NASDAQ by number of shares short as of 4/15, so to say it’s worthy of a squeeze is an understatement.
NIO
NIO was one of my worst trades to start off 2024. I was so bullish on this hitting $11-12, and it ended up going the opposite direction. And so it goes! From $9.50s to a low of $3.61 (*ouch*), it looks like it’s finally starting to show some life again closing above the 10-day MA. In addition I see a 10-day MA crossover to the 50-day which is bullish. If the 10-day MA can cross above $4.93, I’d be looking for this to swing back to $7s, but absolutely needs to hold above $4.93.
HIMS
HIMS was on my top 5 stock picks for 2024 with a price target of $15-20, which technically it did hit, however the last couple of months have been brutal for Hims and Hers bulls. Now the true test is will it hold above the 200-day $9.26, or will it retreat back to its reliable 10-day MA $12.21? If the 10-day can cross back above the 50-day 13.93 and it can close above $12.21 this week / next, I’d be going towards bullish where the stock would get back to its previous $17.16 high. If it cannot close above, I’d be looking for that sub $10 level for a bounce.
DM
The most interesting thing about the DM trade is that it started off as a short squeeze play (and is still ranked at a 100 score by S3 Partners’ Squeeze Rating) and turned out to be more of a fundamental / thematic trade. I was doing research on the manufacturing industry and was excited to learn that companies are turning more towards 3D printing to cut costs and lessen their carbon footprint, which: perfect for Desktop Metal bulls. They report earnings on the 9th, so for the fundamentalist they might want to hear the numbers before taking a position. For the technician, looking at this setup I’d be favorable to see the stock hold its 50-day MA. In addition, there is a potential golden cross setup forming (50-day MA crossing the 200-day). It already ran a lot on the micro (just 45 cents all the way to $1.10), but on the macro this stock has so much room and a fundamental catalyst.
RIG
RIG had an incredible run $4s to $6s, then had a downturn followed by a big selloff this month after ER. Now it’s showing signs of getting back bullish again since it closed above the 10-day MA $5.62. If it can get back above $5.76, I am in favor of this going back to $6s and breaking that previous $6.88 resistance.
CVNA
Raise your hand if you wish you just held CVNA from $8? Yeah, yeah, me too. But unfortunately this was a highly speculative hold not only because of the float but because of the risk of the company going bankrupt. But it looks like they pulled through as back in March there was some very bullish volume that had it gapping up $40s-50s and beyond. Now there is a second gap after the recent earnings report that has me on the fence: the conservative in me says wait until it dips back and fills the gap to $92, and then there’s the side of me that says this run might not be over yet and this could run to $130-150s (mind you this was trading in the $300s at one point). Obviously past performance doesn’t guarantee future results, but if it can make $130 new support and hold $117-120, I’m leaning bullish. Anything below $115 bearish to fill the gap to $92.