The broader averages have been busy busting moves left and right or rather down and up this week. But amid the more volatile tug-o-war between those bears and bulls, some of the market’s most-shorted stocks are unequivocally back in play as big-time buys following earnings.
For a short while this week, it may have looked more like the crash of 1929 than the Roaring Twenties which today’s market has tried to reinvent. The S&P 500 lost more than 4% in three sessions after setting a new all-time-high.
Similarly, blue-chip flavors of the day like Costco (NASDAQ:COST), Home Depot (NYSE:HD) took it on the chin. And the market’s fear index CBOE Volatility Index surged to within a whisker of historically, alarmed readings of 30%.
But as Wall Street looks to close out the week, blue-chips are feeling the love once again. The broader averages have reclaimed more than 50% of the selloff and swept interest rate, inflation worries and other inconveniences back under the carpet.
For select heavily shorted stocks though, it’s been all about earnings this week, as well as gaining more interesting-looking traction off and on the price charts.
Today let’s take a look at three of the market’s most-shorted stocks which reported quarterly results this week. And using those stock’s calls and puts, we’ll formulate some risk-adjusted positions aligned with those findings.
Most-Shorted Stocks to Buy: FuboTV (FUBO)
Source: Charts by TradingView
The first of our most-shorted stocks to buy is fuboTV. The streaming sports upstart has proven a popular and profitable short the past couple months amid a broader rotation out of higher-multiple growth stories. But that looks all set to change.
This week’s street-beating report buoyed by triple-digit subscriber and revenue growth strongly suggests it’s time for FUBO’s remaining bear population of around 14% to exit the playing field. Better yet, it’s time investors go long FUBO stock based on this week’s reaction and technical picture that’s ready to score big-time for bulls.
As the provided weekly view of this most-shorted stock reveals, FUBO has come a long ways both up and down and multiple times this year. Currently 2021’s out-the-gate short squeeze folly depicted by leg AB has been matched by leg CD and more specifically leg CD2.
This leg offers a second-shot completion of a Fibonacci-based two-step or mirror move pattern. It’s bullish. And in this instance, with the pattern completing in a high-volume engulfing candlestick complete with an oversold and bullish stochastics set up, it’s game time for bulls.
My suggestion today is to begin a long campaign in this most-shorted stock using an August $22.50/$35 collar. This fully-hedged strategy removes excessive risk associated with a potential sack of FUBO stock, while being well-positioned for the upside win.
Blink Charging (BLNK)
Source: Charts by TradingView
The next of our most-shorted stocks to buy is Blink Charging. The electric vehicle charging station play maintains heavy short interest of nearly 38%. The outfit matched street estimates with a loss of 18 cents per share, but a post-report reaction shows BLNK up nearly 10%. So, what gives? It could be a case of better-than-expected results prompting some bears into action. But it could be something more, too.
Along with slightly stronger-than-forecast sales growth of nearly 72% and/or some appreciation for this past week’s Colonial pipeline fiasco, that could be grounds for a bit of short-covering. But today, something else is also setting up in BLNK stock’s favor though – a large corrective double-bottom.
Technically, the pattern’s second pivot low has, like the formation’s engulfing candle, found support off the 62% retracement level. This time, however, a bottom is shaping up to finish as a bullish weekly hammer.
My suggestion is to wait for price follow-through next week to confirm a low, along with a stochastics crossover. Should those conditions be met, a June $33/$38 collar is safer and effective way to ride this most-shorted stock long.
Most-Shorted Stocks to Buy: 3D Systems (DDD)
Source: Charts by TradingView
The last of our most-shorted stocks to buy is 3D Systems. It’s another well-shorted stock at roughly 22%, but unlikely to catch the attention of the GameStop (NYSE:GME) crowd onto the next, next big thing to be sure. More important, with the additive manufacturing specialist’s all-around, standout Q1 results and positive stock reaction in hand, today DDD is all about printing money for tomorrow’s bulls.
Technically, the bear market viewed on DDD’s weekly chart looks a look like FUBO stock’s. Each maintains a bullish engulfing weekly candle. DDD stock also sports a similar bullish stochastics crossover in oversold territory.
Slightly different and adding further support to this most-shorted stock, DDD’s potential bottoming pattern is successfully challenging the 76% Fibonacci level, as well as key, prior angular resistance.
Here, I’d also go with a collar. I like to keep on message when it comes to this highly flexible strategy. And today that makes more sense with an August $25/$35 combination as we look to ride a trend reversal to profitability, avoid excessive long premium risk and larger, but avoidable downside exposure.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
