Everyone wants to catch that big runner. Shorting them is great but catching the frontside of a low float ripper can yield you some fantastic returns especially if you have a small account. Longing small caps is a great way to scale your account rapidly, so making sure you can identify which opportunities there are on a given day that have the components of a good long is crucial.

Today, I wanted to break down some of the top tips and things to look for to find small cap stocks that will squeeze.

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1. Float Rotation

This is the biggest factor for gauging if a stock will squeeze or not. Float rotation for those of you who don’t know is essentially when demand exceeds supply in a stock drastically. Whenever the volume traded on the day exceeds the float of the stock, that is a float rotation. It means the float has exchanged hands once and usually that is an extremely dangerous thing for shorts.

Short squeezes and runners usually rotate their floats 2-3x+. Look at these two stocks, $ISIG and $ACET from a little while ago.

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$ACET rotated its float almost 3 times yesterday and gave 2 squeeze opportunities… 1 at the open and 1 midday. It traded roughly 48.5 million shares with an 18 million share float, meaning it rotated its float over 2 times.

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$ISIG had a micro float, which I deem to be under 2 million shares. Any time a stock has a micro float and trades a high amount of shares like $ISIG did (~1 million share

float and it traded 84 million shares… rotating its float 84 times) it is time to aggressively look for the opportunities on the long side.

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Look for stocks with low floats that are trading high volume for the day, making higher lows, trading consistent volume, and pushing into and above resistance zones with authority. Those are the best setups for squeezes intraday.

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2. Open Charts

An ‘open chart’ is one that has light overhead resistance above the current price. I like gappers that push over all key resistance levels on the daily and have ‘clear skies ahead’ for multiple points. No resistance on any chart to stop it besides whole and half dollar marks. If you get a stock that gaps above key resistance levels, has no overhead resistance for a while, AND is rotating its float… look out.

The process to find these types of charts is very easy. Look at the top gainers for the day and look left on the daily chart. Very simple stuff so don’t try to overcomplicate the idea generation.

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3. Hot Sector

Sector crazes are something you need to keep an eye on. We have covered this before in a separate blog, but any time that you have a sector that is on fire and gaining tons of media attention, you’ll want to pay attention to stocks trading abnormally large volume in that sector. Drill down to the chart, check their float, and time your entry if everything looks good. Having a hot sector backing your play will only help give it that extra boost you need to push longer.

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