Recently in the market,
…some serious shorts have been squeezed out due to higher trading volume. Two stocks to highlight and watch closely are $AETI and $BLNK. The first is $AETI, which has some news as it won a $14,000,000 reward for a research project. The market cap overall was small and was a low float. The stock saw a massive uptick with this news, going from $1 to almost $2.50. Anyone that got in at the low market of a $1.10 saw a nearly 200% return quickly on its first green day.
More importantly, there was no extra volume trading underneath, and this creates a severe problem for anyone trying to short. Imperial data and historical trends are key to understanding where the resistance lies in a stock. With so little information shorting, the first green day is a risky move without the proper data.
The opportunity with stocks like $AETI lie within carefully shorting because the stock's range can drop a little too high.
Use a strategy
A strategy is vital when dealing with high volume trades on the first green day. When we bring warrants into the conversation, we must understand the basics of such and that 500,000 in warrants versus the 30 million on a current trading day don’t compare. When you see many warrants being placed, the assumption would be to short underneath the warrant. As the price gets closer and closer to the warrant, the likely hood is traders will start to exercise that warrant. But this stock, like many others, can do, ended up squeezing up to $6.
The biggest lesson we learn from $AETI, and we see it with $BLNK, is even when you see charts that are polished and technical, and no matter the potential for the bust, it’s too risky to try to short warrants or to only use intraday resistance. $BLNK grew significantly in price because the overall volume being traded overwhelmed the warrants and, in turn, pushed the stock forward. A bet here to short would have been a significant loss.