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3 S&P 500 Short Squeeze Candidates

High short interest coupled with strong technical positions is a recipe for pain or profits, depending on your side

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In our latest screen for short squeeze possibilities, we’ve found that short sellers are raising their guards again … though not by much. The latest short interest data for the S&P 500 shows a mild 1.5% increase in short positions — a relatively light increase given the rough patch of trading that has faced traders. (In comparison, short interest on Nasdaq100 companies increased by 5.2% for the same two week period.)

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The increase in short interest in the tech-heavy index is the largest since November 2012 and should be noted as a positive for the PowerShares QQQ Trust (QQQ) as it suggests investors were already pricing risk into this group of stocks. We see that as a positive — these stocks should be more likely to climb the “wall of worry” via short squeezes as soon as the market begins to gain some strength.

Otherwise, we also have seen above-average increases in short interest among homebuilders and transport stocks, despite the fact that they’ve weathered the recent pullback with strength. We would consider these to be short squeeze target-rich environments for the next bullish move in the market given the increased pessimism.

The stock-level analysis of the data reveals some familiar names from our last short squeeze report, along with some new names of interest. The table above shows the top 20 companies that fit our profile, but read on as we focus in on three particularly appetizing short squeeze prospects:

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