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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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Retailer JCPenney (NYSE:JCP) just grabbed headlines when Jim Cramer talked about how his sources had suggested JCP sales were going better than expected for the shopping season. The buzz shook the shorts, which had shorted JCP to its highest ratio in more than a year, at 13 times the average daily traded volume.

JCP shares are up more than 15% since the market hit its November lows, and yesterday’s news was likely to get the shorts covering their profitable positions. Our expectations are that JCP will continue to misfire through the critical holiday shopping season, meaning that now’s a good time to sell into the short-term strength and maybe even short the stock.

Either way, I don’t think it’s time to buy the stock on the recent rally.

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