The mid-May short interest reports hit the wires this morning, showing some subtle changes among the short seller positions for the last two weeks. According to the data, the shorts have been cutting back on their positions lately while the market has been pushing higher. All told, short interest on the S&P 500 companies dropped by roughly 1%.
Perhaps you really shouldn’t fight the tape … or the Fed.
However, while short interest is dropping on the aggregate level, the stock-by-stock data continues to show a number of market-beating stocks that are seeing increased short interest, revealing potential short squeeze plays. The table below identifies 10 potential short squeeze candidates:
Each of these stocks have seen an increase in short interest during the latest two-week reporting period, despite their relative strength against the market and their respective technical strength. Given the technicals, these stocks are at higher odds of seeing the shorts start to cover their positions, resulting in higher prices.
Click to Enlarge Internet infrastructure company Verisign (VRSN) is prepping to break through the $50 level for the first time since October 2012. The level is a key technical resistance level, meaning that a break above it should get the shorts running for cover.
With 10 times the average daily volume tied-up in short interest, we’re expecting to see a spike higher on a VRSN short squeeze. For now, target a move toward $55 during the next few months.
Click to Enlarge The automobile sector is getting a great boost as consumer confidence and discretionary spending continue to improve. Manufacturers like General Motors (GM) and Ford (F) have benefited from the strength, but there are other effective ways to play the economic improvements.
For our money, Carmax (KMX) is an effective play on the improvements in the economy and automobile market as the shares have appreciated more than 20% during the past three months. Now, the shorts are getting ready to get squeezed as the stock breaks higher again. Get on board as KMX continues its parabolic pace.
 Waste Management (WM) has been a repeat performer on the short squeeze list as short sellers continue to dig their feet in and hold out for a pullback. With a dividend yield of 3.4% and year-to-date performance of 26%, WM shares attract both dividend yield and growth investors.
Waste Management is poised to move to the $50 level before year-end — another 16% higher.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.