15 Potential Tech Stock Display Indicators of Short Waste

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GameStop

has grown into a poster child for the 2021 stock market and its pockets of volatility and profitability. The stock gained 1,700% in January, causing pain for investors who are shortening the stock, a popular trading head into the year.

The major movements in GameStop stock (ticker: GME) have been at least partly due to short-term pressure. Pressure is a phenomenon that can occur after major gains in stocks which, in turn, cause huge losses to short sellers who are forced to cover the market. occupations. Short selling involves borrowing and selling stock immediately; if the stock price falls, investors make money by buying shares at the lowest price and returning the shares to the lender. With stock prices not theoretically a risk, there is endless risk with any short position – as GameStop summaries have been finding out.

Short sellers who want to get out of a trade often pay up for the shares needed to cover their trade, leading to a rise in the price of the stock .

Finding stocks that can be vulnerable can be difficult. Conventional wisdom suggests that investors should examine the short interest as a percentage of the stock bog. If that number is high, say 30% or more, it would be more difficult for investors to cover their positions, thus creating pressure, the theory goes.

But S3 Partners analyst Ihor Dusaniwsky, who closely monitors short selling, believes there is a better way to identify short-term bidders.

In his opinion, it makes more sense to look for potential short-term candidates in names where investors have made big and wrong short calls. That means looking for rising stocks with the most short positions measured by dollar value.

Barron’s asked S3 to screen for segments in the information technology department, which is a good substitute for technology, although it does not exclude names such as

Facebook

(FB) and

Amazon.com

(AMZN), which is in the communications services and consumer choice sectors, respectively. The incoming list includes stocks that trade on major U.S. exchanges and have a market value of more than $ 500 million. In total, there were 32 companies where short sellers had lost more than 10% year-on-year, leading to underlying shares rising. Barron’s he shortened the list to the top 15 candidates.

“While all of these securities do not have to run short for the size of the hills, there is a good chance that there will be some who will be pushed out of their jobs as a result of the huge losses. early year – no one wants to start the new year with big red numbers in their pack, ”said Dusaniwsky.

Dusaniwsky said tech stocks are like

3D systems

(DDD),

BlackBerry

(BB),

SunPower

(SPWR),

Daqo New Power

(DQ), and

Microstrategy

(MSTR) are all strong candidates for short pressure.

3D Systems is a manufacturer of three-dimensional printers, software and other digital design tools. Shares in the past year look a bit like GameStop, yielding 303% since the beginning of the year. The company posted a strong quarter on Jan. 7, which has boosted shares.

The king of the Kingpin BlackBerry mobile phone is also a candidate for greater pressure that could push shares even higher. U.S. trading stock from the Canadian company has gained 279% this year – a fact that even the company could not explain. Responding to a request from one of Canada’s security regulators, the company said it is not aware of any substantial developments in the industry that they have not revealed that would account for the increase. The company resolved a patent dispute with Facebook earlier this year, however.

MicroStrategy makes business intelligence software that helps developers make mobile apps. It has also built a huge position in Bitcoin. Shares have been running well in January, rising 39% during the month.

Two green energy companies appeared on screen: Daqo New Energy is a solar cell manufacturer headquartered in China and has been operating since 2007. Shares have risen 81% in January. The San Jose-based SunPower, also based in California on an impressive run in January, gained 104% this month.

Several semiconductor companies also made the S3 list, including

Taiwan Semiconductor Manufacturing

(TSM) and

Intel

(INTC). Taiwan Semi has reaped gains in the past few days following a report of strong earnings and announcing that it was investing heavily in expanding its production. Intel shares have come to a head after the company announced that Pat Gelsinger, the current CEO of

VMware

(VMW), taking over for Bob Swan.

Dusaniwsky said semiconductor stocks have been building a rally since late December, and that several names on the screen could see pressure if minutes have to drop their positions due to huge losses.

Intel and Taiwan Semi are much bigger than many of the other companies on it Barron’s list, but Dusaniwsky says any stock can be subject if one of two conditions is present: The cost of borrowing shares rises rapidly or if short sellers make a big loss after a move advanced from stock.

Write to Max A. Cherney at [email protected]