You Found One: Verify, Rank, Plan

A name on a screen is not a trade. The step between them is verification: confirm the numbers, rank the candidate against others, and write a plan that decides what you will do before the price starts moving. Squeezes punish improvisation.

1. Verify the data

Do these checks in this order. If any one fails badly, drop the name. Metric definitions are in the Squeeze Metrics Cheat Sheet.

1. Short interest. Pull it from two sources. If they disagree by more than a few points, find out why (different float definition, different reporting date).
2. Float. Confirm shares outstanding minus insider and restricted holdings. Check recent filings for new share issuance.
3. Days to cover. Recompute it yourself: short interest shares ÷ average daily volume. Use 30-day and 90-day volume. A recent volume spike inflates volume and shrinks days to cover.
4. Borrow. Look at the borrow fee and utilization, and whether the fee is rising. Rising fee with high utilization means the supply of lendable shares is tight.
5. Supply risk. Look for a shelf registration, at-the-market offering, convertible notes, or warrants. Any of them lets the company sell new shares into a spike.
6. Liquidity. Check bid-ask spread and typical order book depth. A $2 stock with a $0.10 spread costs about 5% round trip (roughly 2.5% each way) before anything happens.

2. The 12-point scorecard

This is a ranking aid, not a model. Score each row 0, 1 or 2.

Total 0 to 12. A score of 8 or more goes to the top of the watchlist. Anything below 5 is noise.

A name that clears fewer than three of the four gates in S1 does not get scored, whatever the total.

Worked scoring. Short interest 35% (2), days to cover 5.0 (1), float 40M (1), borrow fee 55% and rising (2), earnings in nine days (2), price basing under resistance (1). Total 9. Top of the list. On the gates, it clears short interest, borrow and a catalyst inside two weeks. Utilization isn't shown here, and three of four is enough to be scored.

3. Write the plan first

A plan has five lines. If you cannot fill all five, you do not have a trade.

1. Thesis in one sentence. "Crowded short, 40M float, earnings in nine days, borrow tightening."
2. Trigger. The exact event or price that makes you act. "Five-minute close above $12.40 with relative volume of at least 3."
3. Invalidation. The price where the thesis is wrong. "Close back below $11.60." This sets the stop.
4. Size. Dollar risk divided by the distance to invalidation, then reduced (see S4).
5. Exit. Where you take profit and what makes you leave early.

4. Size the worst case, not the planned case

Say you risk 0.5% of a $25,000 account, or $125. Entry $12.00, stop $10.80, risk per share $1.20. Shares = 125 ÷ 1.20 = 104. If the stock gaps through the stop to $9.00, the loss is 104 × $3.00 = $312, which is 2.5 times what you planned. That gap is the normal risk of this kind of stock, not a freak event. Use the stock share size calculator to run your own numbers.

Key Takeaways