3 Short Squeeze Candidates Trading Under $5

Low float stocks can be some of the most volatile stocks in the market. If you mix in a short squeeze, the potential short-term gains in a low float stock can be extreme.

A stock's float is the number of shares that trade freely on the public market. Because insiders and institutional investors don’t typically trade their shares on a daily basis, those shares don’t typically contribute to a stock's near-term liquidity.

Float is the number of shares that remain after accounting for insider and institutional ownership.

Why Is It Important? When a stock gains positive momentum in the market, momentum buyers can rush in all at once. If a stock has a high short interest, short covering can quickly ramp up demand for shares, triggering a short squeeze. Since low float stocks have relatively few shares trading freely, a major imbalance in supply and demand can serve as rocket fuel for the share price.

Buying a low float stock with high short interest isn’t a guarantee of a short squeeze. There still typically needs to be some form of catalyst to get the stock moving in the first place. However, traders can keep an eye on these stocks for any signs of life to try to catch most of a potential big move.

Related Link: 3 Short Squeeze Candidates With Tiny Floats

Short Squeeze Candidates: Here are three stocks trading under $5 per share that have all the ingredients for a short squeeze.

Support.com, Inc. SPRT

Support.com may be the perfect short squeeze candidate under $5 because it has a built-in near-term catalyst for a squeeze. The company announced a reverse merger with Bitcoin BTC/USD miner Greenidge Generation Holdings back in March, and the merger is expected to be completed in the third quarter.

Support.com’s 15 million-share float is very small, creating plenty of opportunity for extreme volatility if trading volume rises. Support.com also has 78.6% of its float held short, according to Ortex Analytics.

The stock has previously demonstrated its potential for extreme volatility. When the merger deal was announced in March, the stock price rocketed from around $2.25 to as high as $9.45 in a single day. Finally, short squeeze traders have frequently targeted stocks trading under $5 per share this year, and Support.com’s shares currently trade at just $4.27.

ReShape Lifesciences Inc RSLS

ReShape Lifesciences is a medical device company that specializes in treating obesity and metabolic diseases.

ReShape has reported net losses in each of the past five years, but as many so-called meme stock traders have realized in 2021, short squeezes are technical market phenomena and don’t necessarily have anything to do with the company’s underlying business fundamentals or the stock’s long-term outlook.

ReShape has a float of 6.5 million, and a short percent of float of 28.2%, according to Finviz. Its stock price is also just $4.23, making it a prime short squeeze target. (Correction: A previous version of this story said ReShape's float was 520,000 shares.)

Recon Technology, Ltd. RCON

Recon Technology develops and markets oilfield equipment and services.

Recon has a tiny float of 4.98 million shares and a 34.8% short percent of float, according to Finviz. The stock also has a history of extreme volatility. In the past year alone, Recon shares have traded as low as 75 cents and as high as $17.50. Today, the stock trades at $3.92.

Posted In: Long IdeasPenny StocksShort SellersTop StoriesTrading Ideas

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