Investing.com -- Short interest in Commerzbank (ETR:CBKG) has seen a significant increase, rising from nearly 0% to 10%, according to findings by short sale focus research firm, S3 Partners. This surge has made Commerzbank the second most shorted stock in the DAX.
The research firm highlighted that despite the increase in short interest, the stock has rallied by 20%, creating a potential high-risk squeeze scenario. The crowded score, a measure of how many traders are in the same trade, is currently at 65, while the squeeze score, indicating the likelihood of a short squeeze, is at 75. Both scores are well above key thresholds, signaling potential risk.
In addition to this, the days to cover, a measure of how many days it would take for all short sellers to cover their positions given the average daily trading volume, have increased from 0 to 20. Utilization, the percentage of available shares that are currently shorted, has also spiked above 50%.
The firm also noted that recently, the stock price and short interest charts have mirrored each other, with short interest doubling while the stock surged 20%. This suggests a potential reversal strategy, where investors are shorting as the stock climbs.
Commerzbank’s movement is also influencing both DAX financial stocks and the DAX index itself in terms of the amount shorted. With positive stock returns and a rising crowded score, Commerzbank is becoming a squeeze target.
The research firm concludes by stating that Commerzbank has transformed from a low-shorted name into a high-risk short squeeze candidate. With short interest at 10%, a rising crowded score, and increasing squeeze risk, any covering activity could drive further stock gains. Traders should monitor this setup closely.
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