Most investors don’t like to mess with stocks that have massive short interest — but sometimes these stocks end up being the biggest winners. And I’m watching a certain e-commerce stock that could have a major short squeeze in the coming days or weeks…
Short selling is a way for investors to bet against a company they believe is overvalued. Ideally, they’ll borrow shares from a broker to then sell on the stock market for a high price, then buy the same number of shares (for much less) after a large price drop and return them to the broker. Their profit is the difference between the price they sold the stock for and the price they bought it back for.
This works out nicely for the short seller when the stock’s price does indeed fall… but things can get hairy if the stock’s price ends up soaring instead. You see, there’s no limit to how high a stock’s price can keep climbing, which means short sellers are on the hook for infinite risk.
When this happens to a stock with a large number of short sellers (high short interest), it can become a major trigger for even more explosive growth on the stock thanks to what’s known as a short squeeze.
A short squeeze happens when a stock quickly jumps higher, which pushes out frustrated short sellers who decide to cap their loss. When those short sellers buy back shares to exit their position, they send the share price up even higher. This often causes complete panic among any remaining short sellers who start buying shares back at ever-higher prices to avoid taking an even bigger loss.
The anxious scramble to buy puts upward pressure on the stock’s price. While that’s bad news for the short traders, it can mean strong profits for the investors who decide to stay long on the stock…
And I see a potential e-commerce stock short squeeze that you could benefit from in the near future…
Traders, this e-commerce stock’s short squeeze could result in some major upside ahead.
This year has shown us that e-commerce is the future of retail shopping — the less contact with people in this post-pandemic world, the better. However, big names like Amazon.com, Inc. (Nasdaq: AMZN) can turn some investors off with its $1.5 trillion market cap and share prices over $3,000.
If you’re looking for the next under-the-radar stock that could deliver high returns, then look no further than Jumia Technologies (NYSE: JMIA).
Formally known as the “Amazon of South Africa,” Jumia is a German-based e-commerce platform that accounts for 70% of Africa’s GDP and internet users. It consists of a marketplace (allows sellers to connect with consumers), a logistic service (enables shipments and deliveries) and a payment service.
Recently Jumia’s stock has been enjoying some major bullish momentum, with share prices doubling in just a few short weeks.
Citron Research is also bullish on JMIA (a complete turnaround from its position last year), which caused shares to soar higher. In a new report, Citron said:
“Their positioning in Africa alone (e.g., logistics, technology, employees, brand) should be worth minimum $7 billion or $100 per share.”
JMIA currently trades for only $17 a share. I definitely think that this stock could trade up to $25 per share if this happens.
Watch today’s video and leave a comment in the section below. Have you ever traded short on stocks before? If so, what are your favorite tickers and why? Did you like the e-commerce stock I recommended today or find this video helpful? I look forward to hearing from you.