Short sellers are starting to get aggressive as we enter the final month of the year. For the last two-week reporting period, short interest on S&P 500 companies rose by 2.8% — its highest levels in more than a year. We view that as a perfect opportunity to pick up a few short squeeze candidates.
Click to Enlarge The addition of shorts shouldn’t be a surprise. Analysts, pundits … everyone has been increasingly nervous of a potential snap to the market’s breakneck rise.
While it shouldn’t be a surprise to see some weakness during the short-term, the increase in short interest suggests that any market decline — such as the current one — is likely to be a short and fast corrective move. After all, traders are already factoring a decline into stocks, via the short sales activity.
This means traders and investors looking for an opportunity to grab up some bargains on a decline need to prepare their short squeeze buying lists right now. That’s because any correction likely will be met with buying soon thereafter, as sidelined traders try to squeeze a lot of cash into a short-lived window of opportunity.
The above table shows a number of short squeeze opportunities that are likely to lead the market higher. Here’s a closer look at three: