Here’s the long and the short of a couple of short squeezes. Check out $SSYS and $DDD. (August 20, 2018)
SSYS DDD NTES DDD
I was looking around for some short squeeze candidates and I found a couple: 3D ( NYSE: DDD ), real quick. First of all, you can look to SSYS ( NASDAQ: SSYS ).
Now, I noticed Investors Business Daily had included 3D Systems ( NYSE: DDD ), which I will get to in just a second, they had included that in an article about, Hey, these former leaders can lead again and this and that and the other thing. That’s great and the 49ers can win another Super Bowl as well, as soon as Joe Montana gets new knees. But hey, it could happen.
It got me looking at the 3D ( NYSE: DDD ) stocks and Stratasys ( NASDAQ: SSYS ) actually looks more interesting, which I will talk about here and then we will look at 3D ( NYSE: DDD ) and this is why: When I see these stocks like this the first thing I do is check the short interest. On Stratasys ( NASDAQ: SSYS ) there is, based on the current volume, 20-days to cover if only the shorts are allowed to buy. It is going to take 20-days for the shorts to recover all of their shares; 20 percent of the float is short. So as I look at this, this is a short squeeze, this is an, Oh crap, I’m wrong trade. If you are short, that’s really, I think, what we are seeing now, it makes me feel better about this trade when I see 3D ( NYSE: DDD ) also moving up.
What I would suggest here on this one, Stratasys ( NASDAQ: SSYS ) is, you look at this stock, it is trading here. Set you a stop of about 7 percent, if the stock falls back below, not just today’s intraday low but maybe Friday’s intraday low, then you go ahead and close out the position; take a licking so you can keep on ticking, but I think this stock can work.
The other is 3D Systems ( NYSE: DDD ). The charts look somewhat similar, which kind of makes sense, it’s a theme trade, the same industry. Here, 30 percent of the float is short and there are 14-days to cover. So short sellers hold 1 in 3 shares here, which means that as the stock moves higher that is going to inflict more and more pain on these guys.
So here, on this one, I think if you are buying the stock here you have got to kind of give it a little more room to work as well, 8, 9, even 10 percent. I don’t like to have stops that loose at all. If I have to have a stop that is that loose I will take a small position, a smaller than usual position. Because it is not the percentage loss that matters it is the dollars. How many dollars are you losing if you get stopped out? On these stocks where they are kind of volatile, you have to keep your stops a little bit loose if you want to avoid getting prematurely stopped out.
Now, another way to go on that, seriously, is on the really super volatile stocks, that is when you want to keep your stops really, really tight because you don’t want the stock to go against you. Okay, that’s fine, you can think about it in those terms too. However, the prerequisite to that approach is that you get really, really good entries. If you get a really, really good entry THEN you can keep a tight stop.
One that comes to mind is NetEase ( NASDAQ: NTES ) for example. This is something that I was covering in the Chart of the Day for a few days saying, “Wait for the bottom, watch for the bottom. It could have been the bottom but it wasn’t. Wait, wait, wait. Oh look, here it is.” So this was a case where the stock was, I would say volatile if you want to look at it in this time frame. But once the stock finally did look like it found that level of support, once it looked like it found that level of support, you don’t have to keep a stop down here. You know when you are wrong if the stock falls just below this last low here of 195.37.
For 3D ( NYSE: DDD ) it is a little bit tougher way to go because the stock is a little bit more volatile. And so you could just say, “Well, I will just keep my stop right underneath today’s intraday low.” That’s fine; you took an 8 percent loss but maybe this was support or this was support. Maybe all the buyers are right here.
Anyway, just make sure your stops are matching your analysis of the stock price and what you expect it to do. If you find yourself getting stopped out all the time and frustrated then you need to kind of rethink that. You need to figure out what is going wrong. It is not the stock. It is not the market. It is you; so figure that out. But for the time being, frankly, as I look at this 3D ( NYSE: DDD ) and Stratasys ( NASDAQ: SSYS ) are a couple of stocks, because of the high short interest and these pretty strong moves higher, I think could probably get some pretty good momentum out of these trades.
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