It’s been a terrific start to November for bullish investors on Wall Street. And many of the market’s most shorted stocks have led the charge. In fact, based on what we’re seeing in three of those names, the show is just getting started once more.
A decision by the Federal Reverse and chairman Jerome Powell to taper its longstanding commitment in the bond market has been the big story as of late. The decision wasn’t exactly unexpected given a strengthening economy and stocks that have benefitted hand over fist from the massively accommodative government support.
Also not entirely surprising, investors have pulled out the Goldilocks narrative and proffered the central bank’s new course as just right for the bull market in stocks to continue happily ever after.
However, the big story in the market’s most shorted stocks and driving this week’s surprise strength was more about Reddit’s apes persistent commitment to the short-squeeze trade and bullish triggers from Bed Bath & Beyond (NASDAQ:BBBY) and Big 5 Sporting Goods (NASDAQ:BGFV) leading the charge. Right now, though, and without having to sweat or hope for headlines to make a trade, let’s allow the bullish charts in these most shorted stocks do the talking. They’ll help show investors the way into profitable positions.
Now, let’s dive in and take a closer look at each one.
Most Shorted Stocks to Buy: AMC Entertainment (AMC)
The first of our most shorted stocks to buy is AMC Entertainment. Along with GameStop (NYSE:GME), AMC stock has been a favorite vehicle since the very beginnings of 2021, as Redditors began to take on Wall Street’s bears.
Now, and following last week’s rally of around 18%, AMC stock is a bull readying to take centerstage once more.
Technically, November’s gains have this most shorted stock setting up in a monthly inside candlestick. That’s nice to see, but there’s more to like as well.
The price action also offers bullish investors a nice-looking second attempt, pullback entry following AMC stock’s August hammer test of its 2016 all-time-high.
So, with stochastics on the cusp of a bullish crossover in neutral territory, there’s every reason to see a sequel to June’s rally upon nearby price and secondary confirmation.
QuantumScape is the next of our most shorted stocks to buy. The $14 billion next-generation electric vehicle (EV) battery play with short interest of 14.3% has charged higher the past two weeks.
To be fair, the price reaction in QS stock has been significant. But the weekly chart strongly indicates something much larger for bulls is now in play.
Technically, this most shorted stock’s rally has been accompanied by supportive well-above average volume.
Furthermore, and bolstering the bull case, the reaction has broken shares out of congestion and Bollinger band squeeze patterns simultaneously, and backed by a momentum-based stochastics crossover.
As I said in my piece last Friday, steep and sometimes adverse price volatility isn’t likely to disappear in QS stock anytime soon. But don’t sweat it, use it to your advantage with a dynamic collar on this most shorted stock.
Most Shorted Stocks to Buy: iRobot (IRBT)
The last of our most shorted stocks to purchase are shares of iRobot, which sport short interest of about 27%. I haven’t saved the best for last, but I do believe bulls will clean up in the maker of the popular robotic Roomba vacuum product line.
Technically, a well-received earnings and sales beat last week have been improved upon with November’s monthly candlestick confirming a deep doji test of IRBT stock’s Covid-related 76% retracement level.
Backed up with a bullish oversold stochastics signal, I’m estimating a first target near $140. In turn, that lines up with the stock’s 50% Fibonacci level and former all-time-high.
Overall, that forecast is for the next six to twelve months. Right now, though, one strategy bullish investors can look to achieve a tidy, risk-adjusted profit with is starting that campaign with the January $80 put / $105 call collar.
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.