PARA stock, heavily shorted at 10% of its float, has seen its squeeze indicator surge after a recent 10% rally. A positive earnings surprise could trigger a squeeze, although the stock’s history suggests post-earnings sell-off is more likely. We use the Black APP on the Bloomberg Terminal to analyze this situation.

Paramount Global (PARA) has a large short position 10% of float. PARA reports tomorrow before the opening, although recently it has reported after the close

The squeeze indicator has repeatedly shot about the 70 level earlier in the year and squeeze events did happen. The crowded score has doubled recently at the short position has grown.

PARA Stock Price, Crowded and Squeeze Score

The squeeze indicator has picked up again for the first time in 3 months with the stock rallying 10%.

The earnings move has averaged 5% in the past two years has moved 15 and 28%.

There is some probability that a positive earnings surprise could trigger a squeeze situation.

Both the stock price and short position have fallen as a general trend over the past year.

On a month basis they are negatively correlated so that when the stock falls, the short position rises so that is a momentum strategy of the shorts piling on, however this relationship is not that strong.

In the past week the stock is up, and the short position is down, both representing bullish sentiment.

Historically, these two events are correlated with the stock selling off afterwards.

PARA’s squeeze risk and high short interest make it a focus post-earnings. Historically, a sell-off is more probable, but a positive earnings surprise could change that trajectory.

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