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3 Stocks About to Be Launched by a Short Squeeze

Are the short sellers getting it right? Nah!

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With the market sprinting lower, we would typically expect to see the short selling crowd jump on the bearish bandwagon to harvest easy money. But, when we did our search for potential short squeeze candidates, we were surprised to find that the shorts are actually reducing their positions on the recent decline.

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That’s right: According to the most recent data, short interest on the S&P 500’s companies registered a decline of 2%, along with declines in Dow Jones Industrial Average components.

Sure, we expect some decline in short interest when the market heads lower just because many shorts tend to lock in profits. But most market bottoms are typically marked by an increase in short positions as it peaks. This, of course, serves only to underscore the hardest rule on Wall Street to follow: The best time to buy is when everyone else is selling (or short selling, as it would apply here).

At the stock level, there are some interesting bullish setups as a result of potential short squeezes that may be waiting to provide a catalyst for higher prices. As always, our database filters the S&P 500 for companies that are seeing relatively high short interest despite a strong technical backdrop. We look for this combination because it’s often the signature of a pending short squeeze.

The accompanying table displays the top companies in this position among S&P 500 Index components, but for a closer look at three appealing short squeeze candidates, read on:

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