A Momo Inc (MOMO) Short Squeeze Could Unlock More Gains

Momo Inc (MOMO) short interest more than quadrupled in the last two reporting periods

Jan 30, 2017 at 11:59 AM
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Momo Inc (ADR) (NASDAQ:MOMO) saw one of the largest spikes in short interest during the most recent reporting period. Specifically, these bearish bets jumped almost 49% to now account for over 13% of the tech stock's float. Even more astounding, short interest on the shares rocketed 333.6% during the last two reporting periods.

Remarkably, MOMO actually advanced in the face of these headwinds. While short interest more than quadrupled, the stock gained nearly 22%, hinting at underlying strength. And with a healthy amount of shares sold short, there's potential for additional gains as underwater bears scramble to cover their positions.

Today isn't MOMO's finest hour. With tech stocks being hammered amid Trump headwinds, the shares have surrendered 4% at $21.99. But there remain plenty of reasons to hope. For one, the stock remains an outperformer, picking up over 31% since its mid-December lows, on a hard bounce off its 200-day moving average. For another, Momo's decline has seemingly found a foothold at the $22 level, which could be switching to a supportive role after acting as resistance earlier this year and in late 2016.

momo daily jan 30

Not only could a short-squeeze benefit the tech stock, so too could additional bullish initiations among brokerages. Only two analysts current track MOMO, leaving plenty of room for a round or two of upbeat attention.

For those considering an options bet on Momo Inc (ADR) (NASDAQ:MOMO), now is a good time to strike. The stock's Schaeffer's Volatility Index (SVI) of 56% ranks below four-fifths of comparable readings from the past year, hinting at muted volatility expectations on near-term strikes. What's more, the Schaeffer's Volatility Scorecard (SVS) of 96 suggests MOMO has tended to make larger-than-expected moves in the last 12 months, relative to what the options market's priced in.

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