Nio, Peloton Among Analyst's Top Short Squeeze Candidates

One of the most powerful tradable market events is a short squeeze, so traders are always on the lookout for the next short squeeze candidate. S3 Partners analyst Ihor Dusaniwsky just released a list of potential short squeeze stocks based on their high borrow rates and large mark-to-market losses for short sellers.

A stock borrow fee is the percentage of a stock’s value that brokers charge short sellers to borrow the stock. If the supply of shares to borrow gets low, borrow fees tend to rise.

“In my analysis I am looking at stocks with over $100 million of total short interest to include only stocks where the short covering from a squeeze can materially affect stock prices,” Dusaniwsky said.

When a stock’s borrow fees spike, it applies pressure to short sellers to choose between closing out their positions or letting fees eat into any potential gains.

Related Links: Apple Short Interest Jumps By $1.3B Ahead Of iPhone Event

Short Squeeze Candidates: Here’s a look at the 10 large-cap stocks with at least $100 million in short interest that have endured the largest short seller mark-to-market losses over the past month, according to S3 Partners. Month-to-date losses are included for each stock:

• Cloudflare Inc NET, -52.3%
• Nio Inc - ADR NIO, -38.2%
• Peloton Interactive Inc PTON, -48%
• Zoom Video Communications Inc ZM, -23.1%
• Datadog Inc DDOG, -25.5%
• Twilio Inc TWLO, -36.7%
• Avalara Inc AVLR, -28.1%
• Slack Technologies Inc WORK, -24.7%
• Mercadolibre Inc MELI, -20.3%
• Etsy Inc ETSY, -30.9%

Benzinga’s Take: Short squeezes are extremely unpredictable, and a rise in short seller losses is not a definitive indication that a squeeze is coming. However, the combination of high short interest and rising short seller losses makes these 10 stocks worthy of being at the top of any short squeeze watchlist.