Crowded-Short Breakout

The method

Crowded-Short Breakout · Shorted

Metadata

Style

short-squeeze-breakout

Holding period

Days to weeks

Risk posture

Exit if the price closes back inside the base, below the pivot; squeezes reverse as quickly as they start.

Universe

ASX equities with at least 60 sessions of price history; only those with at least A$250,000 average daily turnover can trigger, and a reported short position of at least 5% to trigger

Refresh cadence

Daily, after the evening price sweep

Rules

6

The rules

Every rule resolves to pass, fail or unknown for every stock. Unknown means the data is missing, or the figure is not meaningful for this company: it never counts as a pass, and a stock cannot trigger while a core rule is unknown. Rules marked scoring only order the list without gating it. The score is the rules' weights earned: a pass earns more the more decisively it passes, and a trigger rule that has not fired yet earns part of its weight for how close the relevant measure is to its threshold, so the setups nearest to triggering rank first.

1. 1

   Rule 1: Crowded short

   CoreData source: ASIC short positions

   The rule

   A large share of the company's stock has been sold short.

   How we test it

   Pass when the latest ASIC reported short position is at least 5% of shares on issue. Fail when it is lower or when no short position is reported.

2. 2

   Rule 2: Days to cover

   Scoring onlyData source: ASIC short positions

   The rule

   Short sellers would need many days of normal trading to buy their shares back.

   How we test it

   Pass when the reported short position divided by the 20-day average daily volume is at least 5 days. Fail when no short position is reported; unknown when there is no recent volume to divide by.

3. 3

   Rule 3: Breakout on heavy volume

   CoreData source: Daily prices

   The rule

   The price breaks out of a base on heavy volume, the moment covering pressure starts to build.

   How we test it

   Pass when any of the last 5 sessions closed above the highest high of the 40 sessions before it, on volume at least 1.5 times the 50-day average. That prior 40-session high is the pivot, and we report it as the level a failed breakout falls back through. Unknown when the breakout cannot be measured from price history. Until it passes, the stock scores higher the closer its relevant measure is to this rule's trigger threshold, so the setups nearest to triggering rank first.

4. 4

   Rule 4: Market direction

   Scoring onlyData source: S&P/ASX 200 index

   The rule

   A rising market adds buyers. Squeezes can still run in a weak market, but they follow through less often.

   How we test it

   Read from the S&P/ASX 200 (XJO): uptrend when the index closes above its 50-day average and the 50-day is above the 200-day; neutral when it closes above the 200-day but that stack is not in place; downtrend when it closes below the 200-day. Pass on uptrend or neutral, fail on downtrend, unknown when there is not enough recent index data (fewer than 200 sessions) to read the trend. Here it adds to the score but does not block a trigger.

5. 5

   Rule 5: Liquid enough to trade

   CoreData source: Daily prices

   The rule

   Squeezes move fast, so the stock must trade enough to get in and out.

   How we test it

   Pass when the average daily turnover (close times volume) over the last 20 sessions is at least A$250,000. The same floor excludes sub-cent stocks, whose prices are stored to 2 decimal places and are too coarse to measure. Unknown without 20 sessions of price and volume.

6. 6

   Rule 6: Relative strength

   Scoring onlyData source: Daily prices

   The rule

   The stock is already outperforming the market.

   How we test it

   Pass when the stock's 3-month return beats the S&P/ASX 200's 3-month return, that is, relative strength above zero. Unknown without 3 months of price history.

What this cannot see

• ASIC publishes short positions four trading days after the date they are held, so the short figure is always a few days old.
• Reported short positions are net and cover only reportable positions; they are not every short sale in the market.
• Days to cover divides the latest reported short position by a 20-day average volume, so it moves as either changes.
• Heavy short interest often reflects real problems at the company. A breakout can fail, and a stock short sellers are right about can keep falling.
• Everything is measured on end-of-day prices after the evening sweep. We do not see intraday breakouts, the time of day a move happened, or news released after the close.
• Prices are stored to 2 decimal places, so sub-cent stocks cannot be measured reliably; the A$250,000 turnover floor excludes them.
• This is a screen, not a recommendation. Nothing here is financial advice.