You Ask, We Analyze: Will VPC Impact Destroy Shorts Sellers?

On Thursday evening, Benzinga asked its followers on Twitter which stocks they’re focusing on for lotto Friday. From the replies Benzinga selected one ticker for technical analysis. @pejckoo and @AMC2dsMooon are both watching VPC Impact Acquisition Holdings VIH, a special purpose acquisition company headquartered in Chicago.

Benzinga also asked what stock people plan to buy at the open on Friday. @BenjamenKelly and @bibisycl both responded they plan to take a position in VPC Impact. The traders are likely positioning for a potential short squeeze.

VPC could be a great short squeeze candidate due to its underlying statistics:

• Small Float: VPC Impact has a very tiny float of 19.24 million shares.
• High Ownership: 69.45% of VPC Impact’s float is locked up with institutions although insiders do not hold any shares.
• High Short Interest: Short sellers have been piling into VPC Impact recently. 7.03 million, which means 39.22% of VPC Impact’s total float is held short. This number has increased from 6.04 million in July.

The VPC Impact Chart: Within the three months following its Nov. 19 2020 Nasdaq debut, VPC Impact went from trading in the $9 range to hit an all-time high of $22.56. Since then, VPC Impact’s stock has plummeted over 55% back to the $9.82 level where it found a bottom.

On Thursday VPC Impact shot up 5% higher and closed the day up 3%. The action allowed VPC Impact to blast through a resistance level at $10.09 but the bulls were unable to push the stock through a higher resistance level at $10.54 and VPC hit the level and wicked from it. In the premarket on Friday, VPC Impact was attempting to bust through the level.

The stock had a much higher than average daily trading volume with 6.38 million shares changing hands compared to the average 10-day volume of just 693,710 shares. High volume on a security indicates there is a high level of interest and on Thursday the volume was bullish.

VPC Impact’s relative strength index (RSI) is measuring in at about 75% which puts it in overbought territory and is a sell signal for technical traders. Eventually, the stock will need to enter into a period of consolidation to cool the RSI.

The stock is trading above the eight-day and 21-day exponential moving averages with the eight-day EMA trending above the 21-day, both of which are bullish indicators. VPC Impact is also trading above the 50-day simple moving average, which indicates longer-term sentiment in the stock has changed to bullish.

• Bulls want to see continued bullish momentum push VPC Impact up over the $10.50 mark. If the stock can regain the level as support, it has room to move up toward $11.37.
• Bears want to see big bearish volume enter the stock to knock it back down under the $10.09 level. If VPC Impact loses the level as support it could fall back down to the $9.82 mark.
• Short squeeze seekers will want to watch for sustained high bullish volume. Eventually, VPC Impact will either consolidate in order to make a slow progressive move higher or the stock will skyrocket through every resistance level and enter into a volume climax scenario. If it’s the latter, VPC Impact is likely to retrace a large percentage of its move quickly.