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6 Short Cover Rallies to Avoid at All Costs

These 6 recent comebacks are just beacons of false hope

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Green Mountain Coffee Roasters

112912GMCR 300x185 6 Short Cover Rallies to Avoid at All Costs
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Tucked away in Vermont, Green Mountain Coffee Roasters (NASDAQ:GMCR) brands, produces and sells approximately 200 varieties of coffee, cocoa, teas and other beverages. The company is synonymous with its Keurig single-cup coffee machines, as the K-Cup portion packs are their bread-and-butter business. This company is a favorite of the shorts as it is down 18% for the year.

Short interest on GMCR was sitting near its highs of 13 ahead of earnings this week — a dangerous proposition for a short seller. Unexpectedly, GMCR reported earnings that were better than expected earlier this week, triggering a rally in the stock that had to have shaken out the shorts.

From my perspective, the term “blind squirrel finding a nut” feels about right.

GMCR shares are more than 45% higher than before the earnings report, with the shorts likely having already moved out of their positions. We expect this to be a speed bump on an otherwise wretched stock chart; the shorts will start initiating new positions on GMCR as the shine dulls from this week’s earnings news.


Article printed from InvestorPlace Media, http://investorplace.com/2012/11/6-short-cover-rallies-to-avoid-at-all-costs/.

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