“Game On!!??” Well kinda, sorta. When it comes to Wall Street today, it’s bears that are on the offensive. And that goes for many of the market’s most-shorted stocks too. But as the following heavily-shorted shares reveal on their price charts, more well-constructed buying opportunities may be here today or just around the corner.
They say a rising tide lifts all boats. And it’s a popular analogy with investors for good reason. In large part it works. Most stocks have a tendency to move in tandem with the broader market. But that also works both ways and during moodier market environments, you can almost guarantee even the most beloved like an Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA) will feel the pinch of bearish sentiment.
Yet in a market made up of stocks, the most-shorted stocks are the Wild West of what’s possible – Dow Jones and others be damned! Thus far though, today hasn’t been one of those days. With the broader averages under a bit of pressure in Friday’s first half and scoring fresh lows for the week, stocks with heavy short interest are obligingly going along for the ride, led by poster boy meme short stock GameStop (NYSE:GME).
For its part, GME stock is off about 5% on the session and roughly 28% on the week in front of next Tuesday’s quarterly release. But to be perfectly blunt, today’s and the past five days of price action mean absolutely zip, nada, zero as far as what tomorrow or more aptly, what Tuesday’s GME share price will look like. Stay tuned, along with the rest of Wall & Main Street.
As much theater, profits and suffering as “Gamestonk!!” has given bulls and bears and though those trends should continue, today and from what we’re seeing on the price chart, traders may want to consider positioning in three of the market’s other most-shorted stocks.
Most-Shorted Stocks to Buy: Blink Charging (BLNK)
Source: Charts by TradingView
The first of our most-shorted stocks to buy is Blink Charging. News last Thursday of Ohio’s Environmental Protection Agency granting Blink 144 fast-charging stations at various locations across the state sent shares charging higher by more than 17%. Just over a week later, Friday’s intraday lows have rescinded all those gains.
But the weekly price is still shaping up. And with a possible earnings catalyst next Thursday, investors could see big gains in the report’s aftermath.
Investors are still waiting on profits in this one. And that won’t change next week either. More importantly for this most-shorted stock, investor attention will invariably be focused on revenue growth and sales guidance.
Technically, BLNK stock has put together a nice-looking candlestick bottoming pattern. Backed by Blink’s 62% retracement level from this past March’s pandemic bottom and an oversold stochastics crossover signal, this most-shorted stock looks poised to squeeze some bears.
For investors willing to allocate some risk capital into an earnings play, the May $40/$50 bull call spread looks good. The defined and reduced risk vertical is well-aligned with a favorable outcome, while helping keep potential drawdowns to less than 8% of BLNK stock ownership if today’s charging pattern becomes unplugged.
Source: Charts by TradingView
The next of our most-shorted stocks to go long is SunPower. A month ago the solar outfit found bulls sweating the company’s mixed earnings report. Part of the bearish resolve though may have been attributed to late February’s broader market scare. A low on Feb. 23 coincided with the tech-heavy Nasdaq’s own challenges.
Since then, SPWR has outperformed many tech-related names and for that matter, many of the market’s most-shorted stocks. Today the weekly price chart reveals strong technical support for further relative and absolute price performance in the weeks ahead.
Initially after falling out of a symmetrical triangle pattern SPWR stock formed a weekly hammer low. It failed, but only modestly. Moreover, price action continued to hold Fibonacci and support and prior 6-year highs while forming a weekly inside candlestick. This week the formation received bullish price confirmation as shares traded through the pattern high of $36.73.
Today, shares have retreated back inside the weekly price consolidation. It could be a sign of downside to come, but I’m optimistic. With stochastics supporting a purchase, buying on weakness off a newly-formed trendline support promises a better outcome for investors in this most-shorted stock.
I’d suggest using a shorter-term April $35/$40 bull call spread. I like the leverage offered with this particular vertical. As well, it makes sense as it shouldn’t take long for SPWR to either make good on this setup in a big way or buckle under additional pressure.
Source: Charts by TradingView
The last of our most-shorted stocks to trade is fuboTV. FUBO was part of a write up at InvestorPlace from a week ago. Following stronger-than-expected earnings results in early March, which saw bears sacking the stock and investors playing defense into their own end zone, FUBO was looking good for a recovery.
Today or rather this week, those chances in FUBO stock have increased.
Not much has changed as far as breaking fuboTV news is concerned. But price action confirming a decently supported W or double-bottom base has entered the picture. Specifically, a pattern buy signal occurred as this most-shorted stock cleared the high of last week’s inside doji candlestick pattern.
The weekly stochastics indicator has still have yet to generate a crossover signal, but it’s so close you can almost taste it. Bottom line, the observation is there’s enough evidence to place a smarter wager in FUBO right now.
For a stronger defense and appreciating bulls still need to push bears past the midfield line, i.e. the 50% Fibonacci level near $35.50, to gain stronger pattern traction, the May $35 put / $50 call collar looks like a better way to play the game.
On the date of publication, Chris Tyler does not hold, directly or indirectly, any positions in securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.