Okay folks, so two things. Number one, I want to give you a violent update on plays in the market, and then number two, I want to talk to you about a specific setup that is heating up extremely fast. I need to explain exactly what's happening and what to know and the only thing that I ask in return for all of this is that you hit that ravishing like button and also don't forget to subscribe either. Okay, state of the market.

so you have the Dow, the S P, and the Nasdaq showing some healthy inflows today. Cryptocurrency, Though Crypto niche has continued to go crazy with inflows everywhere and Bitcoin. Tried again for another breakout, but still failed to hold 50 at least at the time of film. In this video, we'll see what happens.

Cardano has also been very, very insane in terms of the market. The rise of short-term capital coming in and chasing high-flying stocks has continued. For example, Ticker Symbol Any pretty much came out of nowhere today and doubled, but its momentum had been slowly turning up all week. That momentum turned up.

the heat on short sellers, created a rise in borrow costs and back short sellers into a corner, which culminated in today's massive rally. and it doesn't look to be done yet. Ticker Symbol Mmat. I've also started paying closer attention to high short interest, momentum squeeze, history, upcoming catalysts, as well as of course proof of concept with its latest round of momentum.

Kplt, which we were talking about earlier this week, had another pop today. broke above the red directional Sma line and started taking off. Capital is here, but it certainly doesn't seem to want to stay around for long. but on that token, I want to very quickly cut to the chase and talk about one specific stock that has a lot of the characteristics of a lot of these runners that we've been seeing and it's also one that we've talked about before, but we haven't covered in quite a long time.

Back on December 13th, 2020, we pointed out that a company called Tattoo Chess was breaking out above our red directional Sma line into an upward direction and was setting up for a rally. We also broke down the company's market, the plant-based foods industry and why it seemed like a good deal at the time compared to competitors, and it ended up going from 18 bucks to just under 28 bucks in the next couple of weeks, helped by the Momentum cycle. Then the down cycle came. short sellers obliterated almost all of growth, but especially targeted stocks like Ttcf which came from an S pack that accelerated its downtrend and it went all the way to 15.

and then it bounced back to 23 to 24 as short started getting crushed during that, may bounce back, then back to 15 and now we are once again at 24. And you may have noticed that that last panic selloff on earnings was one of the fastest and that its recovery was also one of the fastest cycle between panic and euphoria in about two or three weeks. And you may be wondering charlie, what the heck is going on here Is Tattoo Chef running up based on the fundamentals? Nope, This isn't a market condition that's rewarding fundamentals right now, especially for small cap growth plays. Although I will say I do like Tattoo Chef's fundamentals over the long run.

and while it's not my most exciting play, it is a high conviction play of mine if you have a long enough time horizon. but that's a topic for another video. This is a market condition that's looking for the next big short squeeze play, and this has an interesting setup for that. Right now, the reason that it's running is plain and simple: Short Scott once again way too greedy on this stock and they're starting to get their bluffs called on it.

Remember, the reason that Tattooed Chefs drops have been so extreme is because short sellers pile onto this cortex. Reported that that has continued with an estimated 2.34 short interest increase and 36 of free float being sold short. And in order to understand the plan of attack here and what the situation is, you really have to understand its history and its context. With Tattoo Chef.

short sellers piled on after that earnings release, hoping to crush this as close to zero as possible. Problem was that earnings weren't exactly terrible. They reported a 45 year-over-year increase in total revenue overall 62 increase in Tattoo Chef branded revenue, increased gross margins, and they finished the quarter with a very strong cash position. and they reported that their products are in more stores than ever, which is what is driving current growth and what is going to drive future growth as well.

Everything with sunshine and roses. But that didn't fit the short seller narrative. So how do they get this down? Well, you focus on one bad part and then you short and distort. Here's the kicker: They reported that net loss was 53.2 million compared to net income of 1.3 million the prior year period.

Now here's the important part. It says this loss includes a one-time non-cash expense of 46 million resulting from a valuation allowance on a deferred tax asset due to additional investments. Now, this is what we call a retail shaker. When this came out, the media and short sellers hammered on the fear in regards to this one provision of a long and very successful earnings report.

They cast aside the entire growth trajectory of the company and focused on this huge loss Where if you actually look at the balance sheet or listen to the earnings call, 90 of this huge loss came from a one-time non-cash expense. And now data shows time and time again. If you're a short seller and you attack a retail stock, it's very, very simple to get retail traders to sell. You put out a piece of contrary information that's causing a little bit of uncertainty in the retail community.

Pile on the short positions, accelerating a downtrend, and then all of a sudden retail traders are like, hey, wait a second. I saw a negative headline and the stock's going down. I guess that means I need to sell And all of a sudden they scream scam and they sell and they run for the hills And guess what, Short sellers just made tons of dough. The fact of the matter is, unfortunately, we as retail traders very very rarely look past the headlines.

We look at the headlines for our confidence in the position. If the media is saying something nice, Oh, that means we can buy more if the media is saying something bad. Oh no, that means that I'm stupid. And then for the second line of attack: short sellers massively increasing short positions.

What does that do? It creates downward selling pressure. We see that we're like, okay, I know that. I'm wrong. Now, I better sell.

I'll buy back in when it's proven to be a good stock again when it's at new highs. So simply they knew that Tattoo Chef is a retail heavy stock and knew that it would be easy to accelerate a downtrend in light of this earnings report that had one line. That was a little bit suspicious. So they did, and Ortex reports that after earnings short interest that was already high prior to that skyrocketed.

For those who said that short sellers only short stocks that are overvalued, why did they wait until after the earnings report to short it? If they are so high conviction that this earnings report was going to be a disaster. The reason was because short sellers don't have any conviction in their positions. they're just trying to exploit the moves. many of the short sellers that are shorting a lot of these stocks.

We're buying a lot of these stocks at much higher evaluations back in January and February and exploiting the long side of the move. It's all market cyclical in a game. But anyways, the stock plummeted and the short attack was very, very successful. However, the short attacks failed to get this to break past previous support levels, and buyers started showing up and rebuying because these were historically oversold prices.

But what a short seller say they said i want more money I think that this one-time expense means bankruptcy. Zero dollars. Zero dollars. Who cares about their growing product line? Nobody cares about that.

This isn't a conviction market. Let's get this down to zero before the next conviction wave comes in. Unfortunately though, like we've seen in so many different other arenas, retail traders called short sellers bluff. They bought it in Mass.

probably saw some other institutional warring partners buying it too. which has led to Shorts getting caught deep in the red on what would have been an easy play. Now on the surface level, this sounds like any other squeeze play short sellers getting too greedy, retail calling their bluff and some big hype euphoria runs. But what's intriguing about this play is its history.

This purple line in the chart here represents cost to borrow. The yellow represents utilization. You could see that historically when the price of tattoo chef has gone up, cost of borrowing has gone up, which obviously makes sense. Heavily shorted stocks rising has resulted in short sellers increasing demand for shorts, which of course increases the cost to borrow too short in the first place.

More demand for something with limited supply means higher prices. But this time around, look what happened. Shorts went on way too strong during the earnings downtrend and now they've backed themselves into a huge corner. a much worse corner than they had before because the cost of borrows is at all time highs, despite Cat2chef itself being far below its all-time high prices.

But it gets worse. You see history and logic suggests that when you have periods of ballooning short interest, skyrocketing borrow fees, especially increasing share price Alongside these what, you're going to get a massive increase of failures to deliver. Why would that be? Well, if you have a massive, massive demand for more shorts during a period of time where there's not that many available, Well, the probability of naked shorting just to dump shares onto the market is very, very high. The higher the utilization and the higher the borrow fees, the lower the chance that you're going to be able to find massive, massive shares to dump onto the market.

Yet when you have short interest that's rising so quickly, it suggests strongly that we're also going to have a new wave of failures to deliver. You see, while failures to deliver on Tattoo Chef have been low for the last couple of months, we basically have the same setup that we had the last couple of times, but now it's much, much more expensive to borrow shares to short, which suggests that failures to deliver when that data comes out is going to skyrocket and failures to deliver of course have to be delivered on eventually via either more borrowing which again shares a very expensive to borrow or buying back, which would cause more buying pressure for the stock if they decide to borrow more shares to satisfy their failure to deliver situation. What happens? Well, the cost to borrow goes up even more, which makes it even harder to borrow shares in the future and makes it even harder for short attacks to go and pile onto the stock if they decide to buy back. What happens? well, obviously bullish pressure on the stock, and in terms of the rest of their currently held short positions, they can try to defer it and defer it as long as they want by re-leveraging at higher and higher price points.

Sort of like a short seller's averaging up, but again, it's becoming very, very difficult to do that because borrow costs are going through, the roof utilization is very high, and the higher the borrow fees go up, the less profitable it is for them to do this strategy. Combine that all together with the massive momentum that we've seen on the stock in the last five days, and it suggests that short sellers need this to go down very, very rapidly. and remember to consider the market cap of the stock too. This is around a 2 billion market cap stock.

A lot of the other squeezers that we've been seeing besides, of course Amc and Gme are much lower market cap stocks, which means there's not as much capital put into shorting it, and there's not as much capital on the line a lot of the time. The summary is basically Shorts are getting back into a corner, the heat is turning up, the cost to borrow and get themselves out of the situation or to fur longer is going through the roof, and retail seems to be understanding that more and more. which makes this even worse of a situation for them. All I'm saying is, if you look at how this is heating up, I wouldn't be surprised if this becomes a very, very contentious battlefield over the upcoming trading days and especially next week and beyond.

Anyways, folks that caps off the video. if you have any questions, feel free to reach out to us below or join us on Zip Trader Circle if you'd like to learn how to trade. With our step-by-step lessons, our private chat, and of course our daily morning briefings where we brief on what's happening in the market each morning and all of our favorite catalysts, Well, I'll go ahead and put a link to that below footstopper. 50 coupon code will get you 50 bucks off before checkout.

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