4 Penny Stocks That Could Ignite A Short Squeeze

Stocks such as AMC Entertainment Holdings AMC and GameStop Corporation GME have been the targets of epic short squeezes this year due to their underlying statistics.

Stocks that make good short squeeze candidates often have a few things in common: A small float, high levels of insider and institutional ownership and, most importantly, a high number of shares held short.

Although high short interest usually indicates a bearish sentiment for the stock, while low short interest indicates bullish sentiment, if buyers come into a stock with high short interest en masse it can force short sellers to cover which then propels the stock up even higher.

Penny Stocks That Fit The Bill: The following four penny stocks, which all trade under the $5 mark, make good candidates for a possible short squeeze.

Digital Ally, Inc DGLY, a manufacturer of digital security products for law enforcement, could squeeze shorts with a small float of just 48.64 million shares. Digital Ally also has a high percentage of its float held short at 14.18%, meaning 6.9 million of its shares are held short. The number has increased from 5.95 million in June.

Between May 29 and June 9, 2020, Digital Ally soared 747% in an epic short squeeze.

See Also: Best Penny Stocks • Stocks Trading Under $2

Ra Medical Systems Inc RMED, a commercial-stage medical device company, has all the characteristics needed for a short squeeze.

Ra Medical Systems has an extremely small float of just 5.56 million shares and 10.01% of its shares held short. The stock has moderate levels of ownership, with insiders owning 11.97% of its float and institutions an additional 11.88%.

Washington Prime Group Inc WPG, a REIT retail company, has been targeted by retail traders previously and in June the stock skyrocketed 279% higher over 10 days.

Washington Prime has a small float of just 22.46 million shares available for trading. 13.19% of Washington Prime’s float is held short, meaning 3.2 million of its total shares, although that number has decreased from $6.41 million in June. Insiders and Institutions own 30.34% of the total shares available.

Lannett Company Inc LCI has 24.52% of its small 33.74-million-share float held short.

Of the four stocks, Lannet has the highest ownership level, with an unbelievable 108.43% of its shares held by insiders and institutions. Lannet is Philadelphia-based and develops, manufactures, packages, markets, and distributes generic versions of brand pharmaceutical products.