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Buy These 3 Stocks, Then Let the Short Squeeze Do the Rest

Technical strength will scorch the bears in CHK, DLTR and GRMN

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We’re excited about a number of battleground stocks right now, as earnings season often provides the perfect catalyst for a short squeeze … at least to those willing to tear through the data.

After a sizable increase in short interest during September, it appears the shorts moved to close their positions ahead of an anticipated agreement on the budget and debt ceiling. The decline in aggregate short interest means those companies that did see increases in short selling are battleground stocks for the bears ahead of what is expected to be an active earnings season.

As always, we dissect the biweekly short interest data in search of technically strong companies with unusually high short interest activity because our studies (and others’ studies) tell us that these stocks have a distinct tendency to outperform the market — often thanks to short squeezes.

The table above identifies 10 S&P 500 stocks currently on our short squeeze list given their respective short interest and technical trends. In each case, these stocks have a bullish score from our proprietary scoring system, indicating that they are likely to outperform the market — even without the added benefit of a short squeeze — over the next month of trading.

Here’s a closer look at three in particular that stand out:

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