Software Squeeze Potential and Positioning Analysis

Software stocks are initiating a potential short squeeze as they break resistance levels despite sector-specific headwinds. Extreme bearish positioning at -4 standard deviations suggests the rebound has significant room to continue.

Key Takeaways

• 1.Software positioning is at extreme bearish levels, with net exposure at negative 4 standard deviations.
• 2.The recent rally is primarily driven by short covering, which has only just begun to erase high short selling volume.
• 3.Software exhibits strong resilience, shrugging off a 24% profit warning drop from Cloudflare to break above technical resistance.

Table of Contents

• SaaSapocalypse - but now for the shorts
• So much catching-up to do
• Trades like a turn-around
• Short covering buyers
• Long/short ratio
• Squeeze potential
• Still a negative 4 sigma

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