It’s a good sort of Friday unlike others for many. But on Wall Street and for bulls and bears plying their muscle in the market’s most-shorted stocks, nothing could be further from the truth. Still, there’s always Monday. And today it’s time to look at three of companies shares offering promising charts ready for action in the coming week.
If you’re unlike me, you woke up today knowing Friday commemorates a day of suffering and death for Jesus. It’s Good Friday. But for stock investors it’s a shortened workweek. As much, any buy and sell orders based on Thursday’s price action or an abbreviated weekly decision are on hold. But after a day of rest, or rather three days of quiet, Monday will be here before we know it. And that’s good news for traders looking to pitch camp in the shares of heavily shorted companies.
Leading into Friday, the price activity was favorable in this niche group of stocks. Volatility remains strong for many of these names and a quick survey of the price charts reveals a fairly equal amount of pattern-based trading opportunities for bulls and bears. And it’s unlikely those trends are going to simply vanish.
The throne of which most-shorted stock is the most vilified at any given time is always subject to change. In fact, GameStop (NYSE:GME), which ushered in this theme-based trading movement, isn’t even in the top 50 of stocks with high short interest. More importantly, the game continues to play on and entering Monday, should include these well-shorted stocks that look ready for action.
Most-Shorted Stocks to Trade: Blink Charging (BLNK)
Source: Charts by TradingView
The first of our most-shorted stocks to trade is Blink Charging. Bears number somewhere in the vicinity of 40% in this EV charging station play. But today’s chart visuals have shares looking amped up and ready for a long positioning.
This week’s trading has confirmed a corrective low in shares which found support off BLNK’s 62% retracement level. As of Thursday’s closing bell, shares are stationed narrowly below the initial trade-through price of $42.39. Technically, the buy decision triggered as the stock took out three weeks of inside candlestick consolidation work and rallied above the high of the engulfing bottoming candle.
With stochastics bullishly-aligned in oversold territory, don’t blink on this one or you may miss a great spot to pick up exposure at attractive levels. I’d go with the May $45/$55 bull call vertical to limit and reduce risk, as well as enjoy strong profit potential should shares begin to move into the right side of this most-shorted stock’s corrective base.
Root Inc (ROOT)
Source: Charts by TradingView
The next of our most-shorted stocks to trade is Root Inc. This one has roughly 42% of its float currently shorted. That’s comparable to Blink. But unlike that bullish-looking price chart, the bears may have this one right.
Root’s pitch is as a technology-based disruptor of insurance products operating a direct-to-consumer model and “usage-based” telematics. It sounds kinda cool, but it’s not as unique as it sounds. More established competition is already playing this angle.
Technically, the bears appear to be running the show with the weekly chart revealing a down channel in shares. There’s a possibility the trend could find shares hitting single digits by this summer. Respectfully though, significant upside risk exists, even if this trend remains intact.
Bottom line, a rally could ultimately take ROOT from today’s $12.19 and toward $19 to $20 before pattern resistance comes into play. And while this most-shorted stock’s bears fought back ROOT’s bulls this week, the prior period’s heavy volume buying, can’t be totally dismissed as short-covering.
Is there a way around this challenging, but bearish proposition? I’d suggest waiting for the prior week’s low of $11.30 to be broken for a tiny bit more confirmation. And from there, purchasing the May or June $10 put to initiate short exposure looks about right for this most-shorted stock.
Riot Blockchain (RIOT)
Source: Charts by TradingView
The last of our most-shorted stocks to trade is Riot Blockchain. Similar to GME, this one sports heavy, but not over-the-top short interest. Currently, the figure is somewhere in the vicinity of 11% to 15%. More important, I’m of the mind those bears are in jeopardy losing big.
Technically, the Bitcoin (CCC:BTC-USD) mining play is setting up in a bullish corrective “W” base. Alternatively, the weekly view also supports seeing the price action as a continuation symmetrical triangle. Either way, conditions in RIOT stock are looking up.
Heading into next week and for longer-term core positioning within the crypto market, if this most-shorted stock can rally above this workweek’s inside candlestick high of $56.82 and stochastics signals a bullish crossover, an early non-breakout entry looks good if accompanied by a hedged June $60 put/$80 call stock collar combination.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in Grayscale Bitcoin Trust (GBTC), but no other 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.
