TradingAgents/docs/iterations/scanners/short_squeeze.md

Short Squeeze Scanner

Current Understanding

Identifies stocks with structurally high short interest (>15% of float by default, CRITICAL at >30%) where short sellers are vulnerable to forced covering on any positive catalyst. The scanner uses Finviz for discovery (screener filters) + Yahoo Finance for exact SI% and days-to-cover (shortRatio) verification.

Key distinction: High SI alone predicts negative long-term returns on average (academic consensus). However, first real P&L data (n=10) shows 60% 7d win rate and +2.15% avg 7d — best 7d performer in the pipeline. This may reflect that discovery-pipeline filtering (technical confirmation, enrichment) already adds the catalyst signal needed to convert squeeze-risk into a directional trade. Cross-scanner confluence (short_squeeze + options_flow or earnings_calendar) remains a stronger signal than either alone and is the primary confluence hypothesis under test.

Evidence Log

2026-04-13 — P&L review (first real outcome data)

• 10 tracked recommendations, 5/10 1d wins (50% win rate), 6/10 7d wins (60% win rate).
• Avg 7d return: +2.15%. This makes short_squeeze the best 7d performer among scanners with ≥5 samples.
• Outperforms analyst_upgrade (50% 7d), insider_buying (46.4% 7d), options_flow (45.6% 7d).
• The scanner is producing positive outcomes as a standalone signal, not only as a cross-scanner modifier.
• However, ranker prompt says "Focus on days to cover" but context string only shows SI%. DTC value is available in Yahoo Finance (shortRatio) but was not being fetched or passed through — gap confirmed.
• Confidence: medium (small sample n=10; 30d data will be more conclusive; DTC gap has been fixed)

2026-04-13 — Code fix: days_to_cover surfaced in context

• Added days_to_cover extraction (shortRatio from Yahoo Finance) to finviz_scraper.py.
• Applied min_days_to_cover filter (previously accepted as parameter but never enforced).
• Updated short_squeeze.py context string to include DTC value so ranker can use "days to cover" criterion.
• Confidence: high (this is a clear context gap between ranker criteria and available data)

2026-04-14 — P&L review (updated statistics, n=11)

• 7d win rate: 60% (6/10 wins), avg 7d return: +2.15% — still best 7d performer. No change from prior analysis.
• NEW: 30d win rate: 30% (3/10), avg 30d return: -1.1% — signal degrades sharply at 30d. The squeeze resolves (or fails) within 7 days; holding longer is harmful.
• This confirms short_squeeze is a short-term-only signal. The 7d alpha is real; the 30d outcome is poor.
• Pattern: WTI and TSLA appeared in Apr 3-9 mature recs as short_squeeze plays — high SI but no clear catalyst timing to trigger covering.
• Confidence: medium (n=11 still small; 30d degradation pattern is consistent with academic squeeze literature)

Pending Hypotheses

• Does short_squeeze + options_flow confluence produce better 7d win rate than either scanner alone?
• Does short_squeeze + earnings_calendar (SI>20%) produce better outcomes than earnings alone? (See earnings_calendar.md pending hypothesis)
• Is there a volume threshold (e.g., market cap <$2B small-cap) that sharpens the signal?
• Does DTC >5 (now surfaced in context) predict better outcomes than DTC 2-5 within the scanner?
• Does standalone short_squeeze (no cross-scanner confluence) continue to outperform at 7d as sample grows?
• Should max holding period for short_squeeze be capped at 7 days in ranker guidance? 30d win rate 30% supports this.