Wayfair (NYSE: W) is about to release its earnings and shorts could very well get burnt. With over 28% Short Float and stock heading to a new 52 week high of $342.40, any positive sentiment could set the stock pricing soaring. Wayfair does have an amazing daily chart.
W Daily Chart
Shares took a much deeper pullback than Wall Street expected. However, they ran into long-running support and began trading higher. The chart pattern took a while to form, but it’s in a great spot now for me to pick up call options. With this forming on the daily chart, we could see shares making their way up and over the all-time highs. To add fuel to the fire, W has a hefty short-float, that could lead to another short-squeeze.
Stitch Fix (SFIX) – 43% Short Float
SFIX 78-Minute Chart
The TPS setup contains three crucial components.
- Clear trend – I want to see a stock that’s in an uptrend. Preferably a sharp move higher or a consistent upward trajectory at or above a 45-degree angle. The blue arrow shows you what I’m looking at.
- Chart consolidation pattern – I’m looking for a spot where price takes a break before making its next move. The solid blue trend lines connect the highs and lows of the candlesticks. I want to see them running parallel or converging on one another over time.
- Squeeze – My secret component, the squeeze tells me when an explosive price movement is imminent. This is denoted by the red dots at the bottom. When they turn green the squeeze has fired.
You would think that after shooting up towards all-time highs again and again people would stop betting against the stock. Yet there is a short load of over 40%. That means nearly one out of every two shares is sold short, making it right for an epic short squeeze. That means you have a lot of traders out there who borrowed on margin to sell the stock short, betting it would go down.
So, when the stock goes higher, they lose money. Eventually, their broker cuts them off and forces them to close their positions. That means they have to buy the stock back, which sends the price higher – forcing more traders to cover their positions, leading to a cascade of buying. What I love about this one in particular is how cheap the stock is. That makes options more affordable to trade.
GOOG has a 61% short float and with this being a $10 stock, one can get options on the cheap. Plus, there’s already been a wave of activity in the options market, so Wall Street may like what they see.
But let’s make sure there’s a TPS setup shall we?
GOGO Daily Chart
Notice at the bottom how you see the blue bar poking out of the red dot. That signals bullish momentum forming. And why wouldn’t it with shares closing near their highs on Friday. This stock could easily run another 10%-20% in the coming weeks, if not more. So, you can bet your buns one can be considering a position here in the coming days.