CVNA Squeezing. ROOT and RXRX are Next

One month ago we mentioned the gamma squeeze coming up on Carvana (CVNA). Now that this is at hand and the stock has more than doubled, it's time to go long on two other heavily shorted stocks that stand to benefit from the CVNA squeeze as desperate shorts have to cover. These are Root, Inc. (ROOT) and Recursion Pharmaceuticals, Inc. (RXRX)


CVNA made a $126 million investment into ROOT and has embedded its insurance program into its systems. So any improvement in financial performance on CVNA implies that ROOT will also follow. It currently has 1.4 million in short interest, representing approximately 15% of the float. Not nearly as much as CVNA, but considering that ROOT trades only around 200,000 shares or so in a day, it can really take off in any sort of squeeze. Or as people realize that these two companies are financially linked and CVNA profits come heavily into ROOT. 

RXRX has doubled in price recently after a $50 million investment made by NVIDIA Corporation (NVDA). Shorts expected it to come down by now, except it hasn't, and is challenging new year highs. It has 18.5 million shares short, representing approximately 16% of the float. Recent shorts are now down over 100% and would be scrambling to cover on top of any short on CVNA. Historically, shorts on RXRX seem to be in at an average price of around $10. They were in profits but now they are staring down losses. 

Stocks like CVNA, ROOT and RXRX are all shorted by the same type of market players. If one position implodes on them, the rest follow. We see evidence of that as both ROOT and RXRX are up in pre-market as CVNA roars into the $50's. Expect ROOT and RXRX to really break out among some other heavily shorted stocks as shorts have to cover across the board to avoid margin calls and traders who won big on CVNA pour their profits into these similar types of stocks. 



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