Concepts trait

Short squeeze setups: short interest, days to cover and a strong chart

What short interest and days to cover measure, and how Breakaway flags heavily shorted stocks with strong charts.

What it is

Short sellers borrow shares and sell them, hoping to buy them back cheaper later. Short interest is the share of a company's stock that has been sold short and not yet bought back. Days to cover is that number divided by average daily volume. It is how many normal days it would take every short seller to buy back. When a heavily shorted stock starts rising, short sellers have to buy to limit their losses. Their buying pushes the price higher still. That is a short squeeze.

How Breakaway flags it

A stock gets the Squeeze setup badge when at least 15 percent of its shares are sold short. It also qualifies when it would take five or more days of normal volume to buy back. Either way, at least seven of the thirteen technical traits have to be firing. The chart condition matters. A heavily shorted stock in a downtrend is shorted for a reason. A squeeze needs the price to already be moving against the short sellers. The Squeeze setups list and the Squeeze setup filter show every stock that qualifies, and an alert can fire when a new one appears.

How to read it

Short interest is published twice a month by the exchanges. So the figure on the card can be up to two weeks old, and the card shows the settlement date. Days to cover above five with rising volume is the strongest version. A squeeze candidate with headlines about new share sales or delisting is a trap. That is why the news score subtracts for those.

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