Today's Scan: February's Candidates For An Upcoming Short Squeeze based on their Days To Cover Ratio
In December I featured a scan of potential stocks ready for a short squeeze. Four of the five stocks moved significantly higher in the following month. To recap what the scan and the Days To Cover Ratio is:
The Days To Cover ratio looks at the number of days necessary to buy back the short interest of a stock based on its average daily volume. For example, if a stock has a short interest of 10,000,000 shares and the average daily volume is 1,000,000, then the Days To Cover ratio would be 10. Stocks with a large Days To Cover ratio have the potential for explosive bullish moves as buyers scramble to cover their shorts. This is often referred to as a "short squeeze". The five stocks below have potential for an upcoming short squeeze. First, all the stocks have a Days to Cover ratio over 22 days. Second, all are trading in the bottom 33% of their one year range, so most short sellers are profitable on their positions. Third, and most important, all the stocks are in the upper 70% of their 5 day range on heavier than usual volume. Could this be the start of a short squeeze? This months short squeeze candidates are:
1. InterOil Corporation (NYSE: IOC): The integrated oil and gas company has a Days To Cover ratio of 24 days.
2. Bridgepoint Education, Inc. (NYSE: BPI) Bridgepoint Education, Inc. provides postsecondary education services. It has a Days To Cover ratio of 27 days.
3. Ebix Inc. (NSDQ: EBIX): Ebix, Inc. provides on-demand software and e-commerce solutions to the insurance industry. It has a Days To Cover ratio of 35 days.
4. KiOR, Inc. (NSDQ: KIOR): KiOR, Inc., a development stage renewable fuels company, focuses on producing cellulosic gasoline and diesel from non-food biomass using its proprietary biomass-to-cellulosic fuel technology platform. It has a Days To Cover ratio of 25 days.
5. DTS Inc. (NSDQ: DTSI): DTS, Inc. provides audio technologies that are incorporated into various consumer electronics devices worldwide. DTSI has a Days To Cover ratio of 23 days.