A Wounded Wolf is Especially Dangerous

As we saw with China plays over the last few weeks there is tons of risk in any and all crowded trades in a bifurcated market coming unglued at the drop of a hat. While I believe that day is coming as far as crowded longs in the Mag7 names, semiconductors, and other assorted plays like CAVA COST PLTR WING, among others, it of course applies to crowded shorts like the China plays staging historic squeezes. 

In addition, a notable AI laggard like Wolfspeed (formerly Cree) has been relentlessly sold since its late-2021/early-2022 major top, sitting out all of the fun of the AI bubble as the likes of NVDA created its own Tower of Babel in terms of price and valuation (not to mention its CEO's ego and hubris). 

That said, WOLF has about 28% of its float held short and may be ripe for a squeeze as Q4 unfolds. 

Recall that bifurcated markets feature both extremes becoming historically crowded: The longs are all crowded up just as the shorts are. In effect, a bifurcated market sees the market lose its discipline virtually everywhere as fund managers and retail alike simply chase the hot new thing and short the laggards without regard to risk, which as you might imagine spawns a uniquely dangerous setup for said trades to implode with great vigor and classic Wall Street ruthlessness when the tide turns.

We have already seen shades of that with the China squeeze, and I would be on watch for the likes of WOLF to follow suit.