29Jan11:32 amEST

A Street Smart's Guide to Short-Selling

As though short-selling had not been challenging enough in the age of The Fed's historically easy policies, not to mention coming off four years of the a multitude of futures markets "Trump pumps," it has not become heresy in a populist age to be identified with virtually any short. 

Of course, I see both sides of the issue. And I have no desire, still, to touch any of the heavily-shorted names in the market with my worst enemy's money on the short side. As we have preached repeatedly over the years inside Market Chess Subscription Services, long before GameStop became the most popular stock the world has ever seen in the span of a few days, we almost never want to find ourselves shorting a crowded shorted stock, especially in a bull run.

Now, if the tide turns and we dive into an established bear market then things can change. But, like it or not, in this (variation of a) populist age, short-selling does indeed provide liquidity to the marketplace and also serves, at times, to alarm investors to possible fraud. 

With this in mind, there are ways to "get at' shorting GME and AMC as there are classic signs of their epic short squeezes nearing completion. On shorter-term timeframes, you will notice AMC and GME basally sport the exact same chart pattern, which is why I am lumping them together. 

XRT (the retail sector ETF, second weekly chart, below) houses GME, while IWM (ETF for the small cap stocks in the Russell 2000 Index, first weekly chart, below) houses both AMC and GME.

In fact, GME briefly became the largest component of the IWM yesterday during a massive pop.

Thus, going forward, looking at puts or outright shorting IWM and/or XRT seems like less-risky way to have exposure if you want to play prospective downside in AMC GME and other squeeze plays which suddenly have a global cult following (Forgive me Reddit, for I have sinned). 

You will notice both weekly charts were already stretched, which makes this retail trader frenzy all the more compelling as a blow-off top sign headed into what is often a rough month for stocks beginning on Monday. 

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