ZIM Integrated stock short squeeze continues: what next?

ZIM Integrated (NYSE: ZIM) stock price is roaring back as investors predict more shipping demand as interest rates starts falling. The shares jumped by more than 10% on Monday, reaching a high of $10.90, its highest point since September 25th. It has risen by more than 65%.

Why is ZIM stock surging?

ZIM Integrated Shipping has been under pressure in the past two years as demand for shipping evaporated. As a result, the company has moved from making record profits and paying dividends into a loss-making entity.

ZIM is not alone in this as other shipping companies like Maersk, Hapag Lloyd, and MSC have reported weak financial results. Most have also suspended their dividends as demand for shipping has evaporated.

These companies are still facing substantial challenges. The first major challenge is in Panama, where the important canal is drying down, leading to delays or longer routes. The other crucial challenge is in the Red Sea, where ships have come under attack from Houthi rebels. These challenges could push shipping prices higher.

It is still unclear why the ZIM Integrated stock price has recently jumped sharply. A likely reason is that investors are bottom-fishing, now that the Fed has pointed to three rate cuts in 2024. In this case, investors are buying stocks beaten down in the past two years.

The other likely reason is that there are signs that the Chinese economy is also bottoming. Last week's data showed that the country’s industrial production and retail sales jumped in November. China is an important market for companies like ZIM because it is the biggest exporter in the world.

Further, ZIM’s performance is likely because it is being pumped by social media users. A closer look shows that the stock’s ticker was trending in key platforms like StockTwits, Reddit and X. 

Most people were sharing this SeekingAlpha article that predicted an upcoming ZIM short squeeze. The company still has a short squeeze of over 20%, making it an ideal candidate for a squeeze.

Is it safe to buy ZIM Integrated stock?

ZIM Integrated is still a risky company since analysts believe that the shipping industry will take a longer time to recover. Technically, I think the stock is forming a break and retest pattern as bulls attempt to retest the crucial resistance point at $11.75, the lowest swing on June 27th and December last year. 

In most cases, a break and retest pattern is one of the most popular continuation signs. Therefore, it is risky to buy ZIM before it clears this resistance level.