Low float stocks can be some of the most volatile stocks in the market. If you mix in a short squeeze, the potential short-term gains in a low float stock can be extreme.
A stock's float is the number of shares that trade freely on the public market. Because insiders and institutional investors don’t typically trade their shares on a daily basis, those shares don’t typically contribute to a stock's near-term liquidity. Float is the number of shares that remain after accounting for insider and institutional ownership.
Why Is It Important? When a stock gains positive momentum in the market, momentum buyers can rush in all at once. If a stock has a high short interest, short covering can quickly ramp up demand for shares, triggering a short squeeze. Since low float stocks have relatively few shares trading freely, a major imbalance in supply and demand can serve as rocket fuel for share price.
Buying a low float stock with high short interest isn’t a guarantee of a short squeeze. There still typically needs to be some form of catalyst to get the stock moving in the first place. However, traders can keep an eye on these stocks for any signs of life to try to catch most of a potential big move.
Related Link: 3 Short Squeeze Candidates In The Energy Sector
Short Squeeze Candidates: Here are three industrial sector stocks that have all the ingredients for a major short squeeze.
Pyxis Tankers Inc (NASDAQ: PXS)
Pyxis Tankers is an international maritime transportation company that owns and operates a fleet of product tankers. In the past 10 years, the stock is down 75%. But as many meme stock traders have realized in 2021, short squeezes are technical market phenomena and don’t necessarily have anything to do with the company’s underlying business fundamentals or the stock’s long-term outlook.
With a float of just 3.96 million shares and a short percent of float of 25.1%, Pyxis is one of the best short squeeze candidates in the entire industrial sector. In addition, short squeeze traders have frequently targeted stocks trading under $5 per share this year, and Pyxis shares currently trade at just 99 cents.
Globus Maritime Ltd (NASDAQ: GLBS)
Globus Maritime is another maritime transportation company that owns and operates a fleet of dry bulk motor vessels. Globus enacted a 100-for-one reverse stock split in October 2020 that shrank the stock’s number of shares outstanding by 99%.
Today, the stock’s 5.57 million-share float and its short percent of float of 24.4% provide plenty of rocket fuel for a potential short squeeze.
Ault Global Holdings Inc (NYSE: DPW)
Ault Global produces power systems used in the medical, military, telecom and industrial markets.
Ault’s 16.3 million-share float is quite as small as the two maritime transportation stocks, but its 24.9% short percent of float provides plenty of opportunity for a potential squeeze. Ault also has a history of extreme volatility. In November 2020, the stock rocketed from under $1.5 to as high as $10.94 in about three weeks.
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