If Lendingtree Continues To Deliver, A Major Short Squeeze Could Be On The Horizon

As shares of online lending marketplace stock Lendingtree Inc TREE have climbed 220 percent in the past three years, the number of traders betting against the stock has exploded 2,300 percent. Ironically. all of these short sellers may be the cause of the stock’s recent resiliency and the reason why positive news could send Lendingtree soaring to new highs.

Short sellers have taken quite a beating on Lendingtree, but they have remained stubborn. Short interest is up 52.5 percent in the past year and now stands at an extremely high 42.9 percent of float. According to shortsqueeze.com, there are currently more than 3.0 million shares of Lendingtree held short with 11.8 days to cover.

With such an incredibly high short interest, there are two factors in play with Lendingtree’s stock.

First, every significant dip in share price will likely be met with buying pressure from shorts covering their positions, similar to the situation with high-flying tech stock NVIDIA Corporation NVDA. Second, if Lendingtree can carry its 2016 momentum into 2017 and reach new highs, at some point shorts may abandon the trade en masse. The combo of momentum traders buying and short covering could produce a major short squeeze.

The next big short squeeze opportunity for Lendingtree traders will likely come when the company reports Q4 earnings on February 23.