“Game On!!” Well kinda, sorta. I’m referring to the continued epic David-versus-Goliath style battle on Wall Street in some of the market’s most heavily shorted stocks. Beyond today’s sideshow and for investors looking for the next big thing with more sustainable staying power, the following most-shorted stocks are offering attractive opportunities for bullish investors.
The nightly news media circus has pulled its cameras and dutifully moved coverage back to how Main Street is faring beyond Wall Street as the nation passes the one-year anniversary of the novel coronavirus outbreak being declared a pandemic. And rightfully so. But that doesn’t take away from the continued and breathtaking resurrection in some of the market’s most-shorted stocks.
Elon Musk’s “Gamestonk!!” has continued to reign supreme with Robinhood’s and Reddit’s WallStreetBets band of merry marauders. Shares are up about 100% this week and adding to this year’s stunning (and stinging) return of 1,370%. GME stock also continues to maintain favor with shorts. More than 40% of the float is still wagered against a stock now valued near $20 billion and what’s increasingly a poor bet against a company increasingly with the resources to pivot successfully. But enough about GME, right?
The so-called smart and larger money has proven itself wrong on more than one occasion outside and well before Gamestonk ever became a stock meme. Think Amazon (NASDAQ:AMZN). Or Netflix (NASDAQ:NFLX). Back in the day those two giants were among the market’s most shorted stocks. And more recently, Tesla (NASDAQ:TSLA), which cost bears nearly $40 billion this past year.
Given historical failed lessons are bound to repeat, let’s revisit a couple of today’s most-shorted stocks. Bottom-line and in light of the Wall Street’s more cautious ways of late, well other than GME stock, now more than ever these market disruptors are offering growth at a reasonable price, off and on the price chart.
Most Shorted Stocks to Buy: iRobot (IRBT)
Source: Charts by TradingView
The first of our most-shorted stocks to buy is iRobot. Back in February, the maker of the Roomba and Braava robot cleaning devices blew past Street views with double-digit growth and pleasingly, hiking its full-year guidance handily above analyst estimates.
Today, iRobot maintains a decent amount short interest at 23% that’s betting against the company. Not only are those investors wagering against IRBT’s obvious business success, but increasingly, a solid-looking price chart.
Technically and over the past five weeks this most shorted stock has shaped an irregular, well-supported bullish “high handle” pattern. The price action follows January’s unsustainable-looking breakout from IRBT’s two-year long cup base. With weekly stochastics also back in neutral territory, conditions are ripe for shares to rally significantly higher.
I’d suggest waiting for some modest weekly chart confirmation then use the May $135 / $155 bull call spread to clean up.
Source: Charts by TradingView
The next of our most-shorted stocks to buy is FuboTV. FUBO has turned itself into an essential service for many people during Covid-19 with its streaming live sports app. Proof? Earnings this past week came in stronger than preliminary guidance issued in late January. Moreover, the report offered solid growth for this up-and-comer whose next big move will be integrating sports betting into the platform later this year.
Investors apparently wanted none of it or decided to opt out as shares sank following the quarterly results. But earnings can be a crapshoot. And focusing on a wider-than-expected loss in a growth stock has proven a losing proposition time and time again. As well and despite the near-term price weakness, bulls that can appreciate the big picture are in strong position to reclaim FUBO stock and rally shares firmly higher.
As the illustrated weekly chart reveals, FUBO stock is forming an inside candlestick bottoming pivot. In of itself, a stock reaction next week through the candle’s high could promote decent upside. But promisingly, there’s more to this pattern. The development is set to complete a second higher pivot low in a larger and very bullish “W” or double-bottom base. And with that being the case, I’d say it’s nearly game over for FuboTV’s resident bear population of 17%.
Look to go long FUBO stock with an April or May Collar strategy as the bulls begin to move up the field and confirm the pattern low.
Beyond Meat (BYND)
Source: Charts by TradingView
The last of our most-shorted stocks to buy is Beyond Meat. Since coming public in 2019, the plant-based meat upstart has maintained its share of skeptical shorts. Right now, the bear count stands at 23% of BYND’s float. But as with its market disrupting predecessors, I’m thinking bulls will be sinking their teeth into the stock and those shorts very soon.
To be fair and since earnings, a wider-than-forecast quarterly loss has trumped the outfit’s encouraging deals with fast-food giants McDonald’s (NYSE:MCD) and Yum Brands (NYSE:YUM) announced that same day. But the modest stock weakness has only worked to solidify a bullish weekly price chart.
Technically, this most-shorted stock’s shares are testing a pattern up-channel and key Fibonacci levels for support. Now and BYND forming an inside candlestick this week, a meaningful bottom could be close at hand. And if history is any indicator, another test of resistance within the channel could find shares exploding higher upwards of 70% by the end of 2021.
Look for candle confirmation next week, then order an April Collar off this most shorted stock’s options menu for a healthier and more balanced investment.
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.