What To Know: The rally in heavily shorted stocks this week got started when Keith Gill, best known as Roaring Kitty on YouTube and X or "DeepF***ingValue" on Reddit, posted a simple meme of a person leaning forward in a chair after being silent on social media for three years.

GameStop Corp (NYSE:GME) was the first stock to move, but it didn’t take long before retail traders began targeting other stocks with high short interest.

If a stock has high short interest, it means many people are betting that it’s overvalued and poised to trade lower as a result. In order to short a stock, an investor must borrow shares from a brokerage and sell those shares in the open market. The goal is to then buy those shares back at a lower price, allowing the investor to profit from the difference.

If an unforeseen bullish catalyst pushes shares higher, short sellers may be forced to exit the trade by buying their shares back at higher prices. Such can result in a short squeeze, and retail traders are well aware. Retail often targets heavily shorted names in an attempt to induce short squeezes by forcing short sellers to cover their positions.

See Also: GameStop Stock Skyrockets As ‘Roaring Kitty’ Returns: Is GME Short Squeeze 2.0 Imminent?

Many of the outsized moves across markets to start the week are indicative of short covering. According to a CNBC report citing data from S3 Partners, short sellers in GameStop stock lost approximately $838 million on Monday.

"Expect short covering in this stock as it already had a 100/100 squeeze score prior to today's trading," Ihor Dusaniwsky, managing director of predictive analytics at S3, reportedly said.

Short sellers are continuing to get wrecked on Tuesday, with GameStop shares up another 51.3% at the time of writing, per Benzinga Pro. But GameStop isn’t the only retail name sending shockwaves across markets this week.

Dusaniwsky noted that AMC Entertainment Inc (NYSE:AMC) short sellers were down $127 million on Monday and are down another $244 million on Tuesday as of the time of writing.

Beyond Meat Inc (NASDAQ:BYND) is another name with very high short interest. 36.87% of the float is currently sold short and the stock is up more than 21% at the time of writing.

Other names that appear to be moving as a result of short covering include Clover Health, Tupperware Brands, FuelCell Energy and BlackBerry, among others.

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Photo: Sergei Tokmakov from Pixabay.