SoundHound stock breaks key support as short interest surges: Is a squeeze coming?

SoundHound stock has plunged to its lowest level since November 2024 as investors continue betting against the voice AI company. It slumped to a low of $5.38 on Friday, down by nearly 80% from its all-time high, a sign that Nvidia’s investment has flopped. 

Investors are aggressively betting against SoundHound stock

SOUN stock has plunged since October last year, when it peaked at $22 after Nvidia took a stake in the company. Despite its strong revenue growth, investors have continued to bet against the company, with the short interest rising to 40%. This makes it one of the most heavily shorted companies in the US. 

Short interest is a figure that looks at the number of shares of a stock that investors have sold short but have not yet covered or closed out. It is usually a measure of how many traders are betting that a stock will fall. A high figure is a sign that many people expect it to drop over time. 

It can also be a sign that a stock will experience a short squeeze, a situation where it rebounds, forcing short sellers to buy shares to close their positions. A good example of a short squeeze was GameStop, which surged in early 2021. OpenDoor also experienced a short squeeze last year.

SoundHound’s crash and the rising short interest is happening even as its revenue continue growing. Its last earnings report showed that revenue jumped by 45% to $61.9 million as more companies continued to embrace its technology. It signed a 7-figure deal with a healthcare system with over 30,000 employees. It also renewed its contracts with top companies like Rakuten Securities and Hyundai.

SoundHound also continued to narrow its losses during the quarter. Its net loss came in at $42.8 million from $74 million a year earlier. The management decided to hike its targets for the year. It now expects that its annual revenue will be between $230 million and $260 million. 

Analysts expect that its revenue will be $251 million, followed by $390 million next year. The real figures will be higher than these because of its recent LivePerson acquisition in a $43 million deal.

SOUN stock price technical analysis

SoundHound stock chart | Source: TradingView

The weekly chart shows that the SoundHound stock has been in a strong sell-off since last year. It has now dropped below the important support level of $5.80, its lowest level in March and August, invalidating the double-bottom pattern. The double-bottom is one of the most common bullish reversal patterns in technical analysis. 

The stock continues falling below the 50-week Exponential Moving Average and the descending trendline that connects the highest swing since January. Its double-bottom pattern was part of the descending triangle pattern. 

Therefore, the path of the least resistance is downwards, with the next key target to watch being at $4. The risk, however, is that it may experience a short squeeze, especially as its earnings nears.

The post SoundHound stock breaks key support as short interest surges: Is a squeeze coming? appeared first on Invezz