The trend we’re seeing in the stock market today has everything to do with momentum. While penny stocks are well-known for their ferocious swings in price, other factors at play can amplify that aggressive volatility. This month a few companies, most recently Support.com (NASDAQ: SPRT) sparked excitement in stocks with high short interest.
Now, I’ll be the first to say that this isn’t a new trend. But it has become a cyclical one in nature this year. We saw it early on with stocks like AMC Entertainment (NYSE: AMC), GameStop (NYSE: GME), and other “meme stocks” thanks to a unified front from retail traders. That trend subsided during the end of Q1 and the start of Q2 then restarted toward the beginning of Q3 with sporadic pockets of this trend continuing to pop up weekly.
The most recent breakout of SPRT stock triggered a large-scale hunt for stocks with similar features. While the company’s pending merger has it wrapped into the popular cryptocurrency industry, that isn’t the main reason traders flocked to the former penny stocks. With a listed float of under 20 million shares and a short percentage of roughly 40%, the “perfect storm” for a mega squeeze materialized into one of the most epic breakouts of the year.
So now, traders are seeking out set-ups with similar details. In this article, we’ll take a closer look at a few penny stocks with higher short interest. Will they be the next group of “short squeeze stocks” to watch before Q3 ends?Short Squeeze Penny Stocks To Buy [or avoid]
- Clovis Oncology (NASDAQ: CLVS)
- Exela Technologies (NASDAQ: XELA)
- SmileDirectClub (NASDAQ: SDC)
- Best Inc. (NYSE: BEST)
In our article last week, “4 Short Squeeze Penny Stocks To Watch After SPRT Stock’s 1,309% Run” we discussed Clovis in this elite group of stocks. While the company doesn’t have the lowest float coming in the hundred million-plus category, the listed short float is hovering around 27% right now.
The company focuses on developing cancer treatments but up until recently, there’s been more bad news than good. For instance, clinical data on its FAP-2286 platform failed to impress the market earlier in the year. This was followed up by poor earnings results. However, as the former turns into the second half of the year, traders are focusing on other things; short interest included.
Clovis’ lead candidate, Rubraca has also gotten some recent attention. This treatment is being developed for numerous cancer tumor types. Ovarian and prostate are among the different cancer tumors and the treatment is already approved in the US for maintenance treatment in adults with recurrent epithelial, ovarian, fallopian tube, or primary peritoneal cancers. Last week, Clovis announced that Rubraca is now available and reimbursed in Switzerland. With this latest expansion and renewed interest, thanks to its short interest, CLVS stock has gotten some attention this week.Exela Technologies (NASDAQ: XELA)
Another one. of the penny stocks gaining attention for its higher short interest is Exela Technologies. In looking at a few outlets, the short float percentage is sitting around 20%. While it isn’t the highest on the list, it is a relatively higher level of short. Needless to say, the last few sessions have been bullish in the market. Furthermore, while daily volatility is apparent, the overall trend since the end of the second quarter has pushed higher.
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Exela specializes in business automation solutions. most recently its Smart Office Suite was named a “Hot Vendor” in Aragon Research’s “Workflow and Content Automation” report. “Innovation is the cornerstone of any successful digital transformation initiative, and Exela is proud to be at the forefront. We believe that being recognized as a “Hot Vendor” in Workflow and Content Automation Solutions, showcases our digital-first approach in allowing enterprises to be nimble and resilient in tough market conditions,” said Srini Murali, Exela’s President, Americas, & APAC.
With a push toward a more digital ecosystem, technologies like Exela offer have come into focus. In particular, the company reported strong Q2 growth thanks to the expansion of its digital solutions for small business clients. Exela has also begun launching products globally. This includes the e-sign platform DrySign, in India as well as its Digital Mail Room, which was launched in the United Kingdom, France, & Germany over the last few months.SmileDirectClub (NASDAQ: SDC)
One of the companies that recently became a penny stock and continues hovering around the upper threshold of the $5 level is SmileDirectClub. Since its IPO, SDC stock has experienced a wild market trend with the most recent seeing it reach lows of $4.63 this month. However, with a short float percentage of around 32%, it has gained the interest of retail traders this week.
Something else that is helping give a boost to dental care stocks, in general, is a New York Times report that came out this weekend. In it, are detail discussed that suggest Medicare may cover dental care thanks to a new proposal on Capitol Hill. Nevertheless, eyes are now on what the company plans on doing next to correct its current course. After coming up short on earnings, David Katzman, CEO of SmileDirectClub explained that the company’s singular focus Is on “maximizing [its] global opportunity and extending [its] leading telehealth platform for orthodontia.”
This focus on international growth could see operations restart in certain locations. Germany and Spain are two target markets that SmileDirectClub has expressed interest in marketing to as it relaunches marketing efforts. Given all of this as the backdrop, SDC stock could be one to watch during the second half of 2021.Best Inc. (NYSE: BEST)
One of the lower-priced penny stocks on this list is Best Inc. The company offers supply chain solutions and logistics services to its clients in China. Recent earnings results have helped spur a bullish tone in the stock market for BEST stock. The company beat earnings per share estimates during the quarter as supply chain processes began to stabilize a bit more.
“In particular, our Express continued to make progress in unit cost reduction and witnessed significant network improvement with enhanced service quality. For Freight business, it continued its industry-leading position and registered a net profit for the quarter with emphasis on our e-commerce capability. Supply Chain Management achieved profitability by serving high-margin customers and expanding cloud OFCs network supported by smart logistic management for better operating efficiency.”Johnny Chou, Founder, Chairman and Chief Executive Officer.
This week, attention seems to be focused on the current short position in BEST stock. As of today, that figure hovers around 36%. Similar to CLVS, BEST doesn’t have the lowest float but market momentum seems to have picked up a bit at the start of the week. We’ll see how the market reacts as August comes to an end and September begins.Are Short Squeeze Stocks Worth It?
When it comes to any major technical event volatility could play a big role. Just look at the breakouts and breakdowns of some of the more popular names in the category. AMC, GME, even SPRT, all of these former penny stocks saw explosive moves higher. But swift drops lower followed before the stocks found footing. If you’re looking at potential “short squeeze stocks” right now, keep that in mind. While there is an opportunity for higher rewards, the risk is a big piece of the puzzle to account for.