3 Short-Squeeze Plays That Will Pummel the Bears

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Short sellers were extremely busy during August (big surprise) as short interest on the S&P 500 companies rocketed by more than 11% for the first two weeks of the month.

Looking into the details, the consumer staples and basic materials sectors saw the heaviest short selling as investors positioned for lower prices among both economically sensitive groups.

short interest table
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Interestingly, tech stocks saw decreases in short interest, suggesting that the shorts expect the Nasdaq and other tech-heavy indices to outperform the rest of the market through the seasonally volatile months of August and September.

At the stock level, a number of attractive short squeeze trades are developing as these highly shorted names continue to perform more strongly than the rest of the market.

While we expect a number of these short squeeze candidates to exercise their upside potential, it should also be pointed out that higher-than-normal volatility begs for tight stop-limit rules. That way, you can avoid quick retreats in stocks — even in these outperformers.

Stocks in the table below match our quantitative model’s criteria as potential short squeeze candidates.

Short Squeeze Plays: Under Armour (UA)

short squeeze under armour uaUnder Armour (UA) has been taking the lead from Nike (NKE), outpacing the competition. Over the past three months, UA shares have rallied 22% — better than NKE’s 10% gains and well better than the market’s -5.8%.

This relative strength has Under Armour stock trading above its 50-day moving average, which is also trending higher.

From a technical perspective, UA remains a strong “buy.” The addition of the stock’s short interest ratio above 6 marks that the stock has a healthy “wall of worry” to help shares trade higher.

A move above $100 will get the shorts covering their position, sparking a short squeeze and fueling further gains.

Short Squeeze Plays: Expedia (EXPE)

Short squeeze plays expe stock

Travel companies have maintained a healthy trend as consumers have been more than willing to continue spending on travel-related items. Expedia (EXPE) has benefited from increased travel as revenue and earnings figures are now beating analyst expectations again.

Short sellers increased bets slightly against EXPE in August, raising the stock’s short interest ratio. Currently at 6.5, the short interest ratio is nearing the 8 level that has sparked short covering rallies twice this year already.

A move above $120 will likely act as the catalyst for a short covering rally that would drive prices higher by 10% or more.

Short Squeeze Plays: Charter Communications (CHTR)

short squeeze chtr stock

While the rest of the market focuses on buying Netflix (NFLX) and other media stocks, they may be ignoring a critical link in the related bullish case. While some media companies are benefiting from the “cut the cable” movement, it appears that the market may be forgetting about the fact that these companies success will drive success for the group.

Charter Communications (CHTR) has been aggressive in their expansion plans as evidenced by the potential merger with Time Warner Cable (TWC). Other potential deals indicate that Charter is likely positioning to benefit from the consumer move toward a la carte consumption of media, all of which will require bandwidth to deliver service to the television.

Short sellers have been increasing their positions heavily since May, resulting in a current short interest ratio of 8.2. A bevy of technical support just under current prices suggests that the stock will be well supported, bolstering the bullish CHTR argument.

A break back above the $190 mark will initiate a covering rally with a likely target of $210.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/short-interest-short-squeeze-ua-expe-chtr/.

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