“The convergence of multiple timeframe squeezes, high short interest, and strong technical patterns makes LOVE a compelling setup for potential explosive moves.”
With the market’s explosive move higher over the past week, I’ve been zeroing in on high short interest names that are showing clear technical setups.
When the market runs hot like this, these stocks can make massive moves in a hurry.
Today I’m breaking down Lovesac (NASDAQ: LOVE), and this setup has all the ingredients I look for when hunting for potential explosive moves.
First off, LOVE hit up 52-week highs of $32.39 yesterday – and longtime readers know I love trading stocks breaking out.
But what really has me excited is the powder keg of short interest sitting under this name.
We’re looking at a massive 28.5% short interest with a super tight float of under 16 million shares.
In this market environment, when shorts get squeezed, they get squeezed hard – and this technical setup is screaming for attention.
The technical picture is nothing short of compelling:
Multiple Timeframe Compression
Yesterday, we witnessed a rare occurrence – simultaneous squeeze setups across four different timeframes (195m, 130m, 78m, and 30m). It currently has a squeeze on the daily chart.
Think of this like pressure building in multiple chambers simultaneously – when they release in tandem, the move can be explosive.
EMA Configuration
The daily EMAs are showing what I call a “stairway to heaven” pattern – a strong stacking formation that often precedes significant upward moves. It’s like having multiple layers of support, each reinforcing the next.
Short Squeeze Dynamics
With that eye-popping 28.5% short interest and relatively small float, we have the perfect recipe for a potential short squeeze.
Any significant upward movement could force short sellers to cover, creating a cascading effect of buying pressure.
With LOVE’s low average daily trading volume (about 275K shares per day, any surge in buying pressure can have an outsized impact on the price movement.
Company Dynamics
While my focus remains firmly on the technical setup, it’s worth noting that Lovesac has been showing resilience in a challenging retail environment. Their recent earnings in September showed better-than-expected results, with online sales helping to offset showroom challenges.
The combination of their omnichannel approach and innovative furniture designs has helped them continue gaining market share, even as the broader furniture industry faces headwinds.
Your Action Plan:
On Monday, I initiated positions in LOVE during my Daily Profits Live Trading Room session:
- Bought LOVE December 20 $30 calls at $3.70
- Added another contract at $3.80
- Currently holding 3 contracts with a $3.60 average
- I also bought some “lotto calls” that expire this week.
I’m willing to scale up to 5 contracts total on this setup on the December options, given the multiple technical triggers aligning.
Remember, these are the kinds of setups I love to trade – where technical signals align with potential catalysts for explosive moves.
If you’d like to see more setups like this and learn how I trade them in real-time…
