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Tootsie Roll stock gets caught in short-squeeze frenzy, stock up 12% yesterday

Tootsie Roll stock got caught in these days’ short-squeeze frenzy coordinated by hundreds of retail traders through Reddit channels like WallStreetBets, effectively pushing the stock 12% in a high-volume session.

Tootsie Roll Industries (TR), a company that produces candy, chocolate bars, and other sweets, saw its trading volume surge by nearly ten times the daily average on Monday and Tuesday while yesterday a total of 7.2 million shares exchanged hands, approximately 70 times the daily average volume of the stock before the short-squeeze mania started.

According to data from S3 Partners, Tootsie Roll’s short interest was 46%, making the stock one of the most heavily shorted in the US stock market, while based on its daily trading volumes it would take around 23 days for short sellers to fully cover their position.

This means that a short squeeze for Tootsie Roll can take a while to play out based on an assumed daily volume of 326,100 shares, although daily volumes can vary if long-term holders decide to dump their shares in response to the uptick.

So far since this move started, Tootsie Roll shares have advanced 43.5% while they are up 0.9% so far in today’s pre-market action at $43.24 per share.

Tootsie Roll would be one of the latest in a growing list of stocks that are being short-squeezed by retail traders as part of a coordinated effort to force the hand of institutional investors who are being pressured to close their short positions, effectively pumping the price higher amid a temporary supply shortage.

What’s next for Tootsie Roll stock?

tootsie roll stock 1
Tootsie Roll Industries (TR) price chart – 1-day candles view with volume, RSI, MACD, and other indicators – Source: TradingView

If the advance of Tootsie Roll stock were to continue in the following days, short-sellers will likely fold their positions to cut their losses either by choice or amid the automatic execution of stop-loss orders.

So far, an approximate 9 million shares have exchanged hands in the past three days – roughly 55% of the stock’s float – while it is unclear how many of those shares were bought by short-sellers who may have already covered their positions.

The fact that the price ended up at the lowest end of the session’s trading range gives room to think that there were many sellers who were willing to dump their shares in response to the surprising uptick, while the future of the stock price will largely depend on whether those shares were bought by those who were short or if they were taken up by those pulling the short squeeze.

The following days would determine if the short-squeeze still has room to keep going or if short-sellers reacted quickly than as they potentially anticipated a GameStop-like situation.

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Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.