In this thread I'll eli5 the general picture, how you can detect these potential squeeze targets, which metrics to use and what to expect. The discussion should be basic enough to allow everyone to understand the content.

Let's start with the setup, which is relatively straightforward.

Setup

The company in question is usually the object of a sudden bullish news, after which the stock price goes parabolic, typically during extended hours (AH or PM).

The few of those who originally had been investing in the stock before the news now find themselves in a profitable position. The greedy HFs and everyone else that can short also want to feast, but had no initial positions and surely aren't going to buy in at such "inflated" prices. Instead of that, they sell first and buy afterwards by using their ability to borrow.

By contrasting with previous situations, on the type of company and bullish news, they predict that the hype will be short-lived and that the price will fizzle out as the day progresses. So they start by borrowing shares in massive numbers as soon as they can, early in the day, then sell once they think the stock price has peaked (typically during the first hour or so of regular time). They expect to buy the shares back once the price drops enough (soon after selling or later in the day), return the shares to the lender and pocket the difference.

When they borrow they have to pay borrowing fees, a percentage of the stock price that increases with demand and with Utilization (100% Utilization = all shares available to borrow have been borrowed. 0% Utilization = no shares have been borrowed). Because of that, they can only buy back and return the shares at a profit if the stock price drops low enough. Their problems start when that does not happen.

The Metrics

Since all the action and the squeeze happen in a matter of days during these unique situations, you cannot rely on official established figures to deduce the stock's short interest or how underwater the shorts currently are. Exchange-reported SI is out twice a month and data service providers like Ortex, S3 Partners, etc, get that data from the exchanges. In-between those dates, Ortex and the others make some estimates based on the number of borrowed shares in order to output an approximate daily value for the short interest (see for example this reply by the lead dev of Ortex). However, those figures take some time to produce and, by citing someone else's words, Ortex and the others "all have limited data points and miss iceberg shorts, or if they catch them they over extrapolate".

In order to detect a potential squeeze target in these unique situations, you can look at four important metrics besides the free float (the lower the better) and the options chain (no options is the best case scenario because it implies no hedging):

• Short Volume (example: ChartExchange)
• Availability to Borrow (example: IBorrowDesk = data from IBKR brokerage)
• Cost to Borrow (example: Ortex + IBorrowDesk)
• Price Action (charts)

IBorrowDesk shows the number of shares available to borrow every 15 minutes, along with the borrowing fees (if a certain 15 minutes period is not shown, it implies there were zero shares available to borrow during that 15 minutes interval). Another metric are darkpool volumes (which ChartExchange also shows), which are typically correlated with short volumes in these situations.

LGVN, ISPC and BFRI

These are three stocks in the biotechnology/biopharmaceutical sector that recently saw sudden bullish news and significant price action. These three have no options (so shorts cannot hedge) and have a microfloat of around 3M shares each (check MarketWatch) which allows: a) large price swings, b) retail and other funds to get hold of a significant fraction of the float, reduce supply and send the stock price upwards under heavy demand (shorts have to cover their open positions at some point).

Bullish news & massive shorting dates:

LGVN: on Nov 18.

ISPC: on Nov 22.

BFRI: on Nov 24.

Firstly, let's have a look at the short volumes of each stock:

LGVN short volume

ISPC Short Volume

BFRI Short Volume

Short Volume (reported daily by exchanges, at the end of the day) differs from Short Interest (harder to evaluate): the latter represents the number of short positions still open, while the former also includes the ones that have been closed. Nevertheless, short volume is still a very good metric in the absence of an SI figure and allows a sense of how shorted the stock might be. In each case, you can clearly see the difference in volume between the days before and after the bullish news.

Let's also look at the availability to borrow and cost to borrow for each:

LGVN: Exactly zero shares available to borrow since Nov 18, so IBorrowDesk doesn't show anything.

This implies that, at any given time, all the shares that the brokerages could lent have been borrowed. It also means that the shares that have been borrowed are not being returned (no covering), or that whenever shares become available to borrow those shares are immediately scooped by shorts. They can then proceed to short the stock further to bring the price down, or sit on these borrowed shares and wait to see if they want to short or return the shares.

ISPC: There were zero shares available during Nov 22 and Nov 23, IBorrowDesk no longer shows that period of time. It then shows a few shares available until 11:30am on Nov 24 and more available throughout Nov 26, always at a borrowing fee above 100% (read the list from the bottom to the top):

ISPC Borrow Availability and Fees

BFRI: Zero shares available to borrow since Nov 24, with the last reported borrowing fee by the brokerage at 136.9% (and an insta spike from 1.3% to 136.9%):

BFRI Borrow Availability and Fees

You can also use Ortex to check the Utilization and the cost to borrow (CTB), which in the case of BFRI currently shows:

BFRI Utilization & Cost to Borrow

Ortex currently reports an insane CTB between 259.5% and 324.5% and Utilization at exactly 100% as expected. Along with the short volume, this suggests the stock has been massively shorted, that the shorts have not covered most of their positions and are doubling down (no shares have become available to borrow, the borrowing fees/CTB are sky high and the charts don't show a squeeze peak yet). With this, they are trying to bring the price down in order to reduce their losses when they cover the positions they have open.

To discuss the price action, here are the charts of each stock (I'm suppressing extended hours for visibility; also recall that the 25th was Thanksgiving and on the 26th the stock market closed three hours earlier):

LGVN since Nov 18

ISPC since Nov 22

BFRI since Nov 24

Along with the above metrics, the chart on the first and second day help you identify a potential squeeze target.

In the case of LGVN, throughout Nov 18 (the first day) the stock price kept increasing on average and closed above the opening price. This means the shorts didn't have a chance to close their positions at a profit (they couldn't buy back at a price sufficiently lower than when they started shorting). Those sharp red candles show you when they attempted to bring the price down on that day. During extended hours they covered a bit (there's a gap between the opening price on the 19th and the closing price on the 18th) at a loss and then doubled down at open on the 19th. Throughout the days, they kept covering, always at a loss, and doubling down. On the 24th, the massive red candles show you their desperation, trying to bring the price down and to trigger stop losses right before they start covering massively. It's important that you keep tracking the volumes of each candles; in particular, sudden large volumes signal the presence of large players in the game, as well as what's about to happen in the next few seconds. Here's the tweet of one short who suffered a heavy loss with LGVN (he's a daytrader who goes both ways).

In the case of ISPC, the stock price did fall a bit on average during Nov 22 (the first day) and closed a bit lower than the opening price. However, apparently the drops in price were not enough for the shorts to exit at a profit on the first day because they covered quite a bit during extended hours (large gap between the opening price on the 23rd and the closing price on the 22nd) and then doubled down at open on the 23rd. They also tried to bring the price down during the next AH and PM period. At the end of the day on the 24th, they tried to take advantage of a lower stock price in order to start covering massively during AH and during the PM of the 26th (huge gap). There was a further attempt to bring the price down and trigger stop losses early on the 26th before another massive period of covering. The large sudden price drop close to the end, along with all the data, suggests this play is not over yet.

The case of BFRI is still in its infancy, so it's probably the best play right now to those who want to maximize their profits. The first day (Nov 24) represents an intermediate case between LGVN and ISPC. The stock price didn't close particularly lower than the opening price and the drops in price were not enough for the shorts to exit at a profit. There was then a period of covering during the PM on the 26th and the price action during the 26th is similar to the price action that LGVN had before 3pm on the 22nd. There was then a large short precisely 15 minutes before the early closing on the 26th (the stock halted and halts last for 15 minutes, which thus prevented trading from resuming during regular hours). All the data suggests this stock is about to follow a path similar to that of LGVN (heavy short volumes, extreme CTB figures, Utilization at 100% since the day of the news, similar price action). There should be some ups and downs until we see several large periods of covering.

This is more or less what I wanted to cover in this thread, hopefully the information will be useful to all of you in order to identify future potential squeeze targets. The closer to these cases the better because we already know what to expect. Good luck to you all, I wish everyone to be profitable in their trades!

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EDIT: BFRI will report their third quarter financial results on Nov 30 before open. Good news will be a massive positive catalyst, bad news might have the opposite effect. The stock currently has a PT of $20 by Roth Capital, announced on Nov 24. This announcement can either be legitimately bullish (it caused the initial rush) or it might be a trap, I don't know. Just trying to present both sides.

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