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3 Short Squeeze Candidates Climbing the ‘Wall of Worry’

Keep your portfolio hedged against a possible short-term correction, but don't ignore these bullish trade opportunities

By Johnson Research Group

http://invstplc.com/1jFNptz

Short selling increased again in June as the most-hated rally in recent history continued its march higher. Short selling on the SPDR S&P 500 ETF (SPY) grew by more than 5% as the bears are digging in their heels, which in turn is setting up a few short squeeze opportunities.

short squeeze table
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In our opinion, the increase in short interest is helping to maintain the low-volatility market melt-up as these traders are likely closing out their position on the slightest pullbacks, offering an inventory of buying power. This take goes against our expectations that the market is likely to see a short-term correction soon.

While we still think that it is important to maintain a hedge on one’s portfolio for the likely correction, it is also important to remember to not ignore the bullish trade opportunities at the stock-by-stock level. The market continues to provide ample opportunities for those watching for short squeezes.

Here’s a look at three potential short squeeze candidates:

Short Squeeze Candidates – Cablevision Systems (CVC)

short squeeze cablevision CVC stock
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The shorts are piling into Cablevision Systems (CVC) as the stock and its sector peers are showing signs of technically strengthening.

Currently, CVC stock is trading above its 50-day moving average, which is trending higher — a sign of momentum. With a short interest ratio in excess of 20, any move higher is likely to spark a short squeeze.

We like a target of $20 in the short term, which represents 13% upside from here.

Short Squeeze Candidates – 3D Systems (DDD)

short squeeze 3d systems ddd stock
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3D Systems (DDD) and other 3D printing companies were all the rage last year, only to be dropped like a hot rock on their high valuations.

Now, however, these companies are showing life again as applications for this technology are becoming a reality.

DDD short interest is running more than nine times the average daily volume, signaling the likelihood of a covering rally. 3D Systems’ stock is in the process of breaching the technically important $60 level. A successful break above this price will likely start a short squeeze, driving the price toward our short-term target of $70, which lies about 17% higher.

Short Squeeze Candidates – ADT Corp. (ADT)

short squeeze ADT stock
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Many of the companies associated with the housing industry continue to break into technically strong trends, including home security firm ADT Corp. (ADT).

Despite the strength, the short sellers have been piling on the bearish bets, driving ADT’s short interest ratio of a reading above 20, its highest in more than two years.

ADT’s stock price is now filling the gap from the drop caused by February’s disappointing earnings, just as we head into the next earnings season. We expect the shorts to start covering and driving the price higher as the shares break above the $35.

Watch for a short squeeze to drive prices toward the $38 level before the end of July’s earnings announcement.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/07/3-short-squeeze-short-interest-candidates/.

©2017 InvestorPlace Media, LLC