What is the Squeeze Ranking?

Thanks to Brian - a poster on my blog for the following information on what the ShortSqueeze.com Squeeze Ranking really means. (Just an FYI too, the comments have been re-directed to a discussion page, but I missed some links to the comments. Sorry for the confusion, I will try to clean up, otherwise the comments might not be seen. I have copied this over to the discussion board as well.)

Short Squeeze has developed the Squeeze Ranking system used to gauge a stock's squeeze potential. We use a proprietary algorithm used to rank a stocks potential for either a bullish or bearish stock price move. Squeeze Theory is the creation of Dylan Wetherill, the founder of Short Squeeze. The theory seeks to identify the basic principles that cause a stock to experience a short squeeze (bullish) or a long squeeze (bearish).

For example, a Squeeze Ranking of 0 is neutral, with unlimited up or down values to mark bullishness or bearishness. A Squeeze Ranking of 2,000 would be more bullish than a Squeeze Ranking of 50. Conversely, a negative Squeeze Ranking of -3,000 would be much more bearish than a Squeeze Ranking of -50. As a Short Squeeze member you are able to search all stocks and find stocks with the highest Squeeze Rankings: short squeeze (bullish) and long squeeze (bearish). The process Squeeze Rankingâ„¢ system is designed according to the principles of Squeeze Theory.

Many people assume that short interest in a stock alone biases a stock to either upward or downward price moves. This is not the case. The potential for a squeeze is dependent upon two market forces: the amount of concentrated short interest that exists in a stock and the price action of the stock.

Part 1: A stock's Days To Cover (Short Ratio) and it's Short Percent of Float are both used to identify the amount of concentrated short interest that exist in a stock. The higher these numbers, the higher the amount of relative levels of concentrated short interest there is in a stock.

Part 2: The second factor in evaluating a stock Squeeze Ranking is the stock's price action. The stronger a stock's price performance is, the more pain will be felt by people who are short a stock. If someone is short a stock and the price action is relatively flat, there is little immediate incentive for a short to cover their position (buy stock). On the other hand, a stock experiencing powerful upward performance, or even making new 52-week highs, can cause an extreme desire by short traders to exit their trades. This is done by buying stock, which can initiate a chain reaction of buying interest to surge into a stock. This powerful market force is called a short squeeze.