Karl Loomes On Ambarella Short Squeeze

Shares of Ambarella surged on Tuesday, trading as high as $60.89 before settling the day at $56.96, representing a 9.88 percent gain. The strong gains surprised some traders as there were no major announcements that would have supported a near-10 percent appreciation. Shares of Ambarella traded as high as $129.19 in the summer and the stock is still higher by more than 25 percent from a year ago. Karl Loomes, Market Analyst at SunGard's Astec Analytics told Benzinga that there were "some signs" that short sellers were covering their positions during Tuesday's trading session. He added that short sellers seemingly started to open few positions later on in the day. Loomes continued that the volume coming into the stock on Tuesday was unlikely large enough to support a thesis of a mass short squeeze. In fact, the covering was likely brought about by the share price increase itself as many traders' stops were activated given the "large and sudden" jump in the price. "Overall it does look like borrowing was down on the day (i.e. net covering) but again, these numbers are far too small to have generated a squeeze," Loomes said. "To put it in context, I believe normal trading volume for Ambarella yesterday was about 5.7 million shares. Our data shows that net covering (or technically the amount of loans returned) amounted to about 200,000 shares, with the total volume of returns for the day around the 500,000 mark." Loomes concluded that borrowing itself (and presumably short selling) is still "very high." In fact, short selling levels are currently at the highest it is has ever been for the company. Accordingly, if a large group of short sellers decided to cover their positions en-masse, this will definitely create enough volume to trigger a squeeze.