Market Overview

These 4 Stocks are Primed for a Short Squeeze

The market received the newest short interest data last week. While the top-shorted stocks are not much of a surprise, traders should take note of a few stocks with great potential for a powerful short squeeze compared to their chart action.

Deckers Outdoor (NASDAQ: DECK): There are plenty of reasons to keep an eye on Deckers. This footwear manufacturer has a massive short interest of nearly 49 percent and is down 60 percent from its 52-week high.

The stock has been in an ascending channel since November but traders will also note a wedge pattern that continues to tighten. The market may force shorts to cover if the wedge breaks out to the upside.

First Solar (NASDAQ: FSLR): Traders have watched in awe as a once $300 stock dropped to the near single digits. Since then, the stock has rallied back into the $30 range, but that still represents a 90 percent drop since 2008.

For shorts that held on for the fall, the reward was handsome, but that does not mean that this solar stock has not given longs the opportunity to profit from a temporary short squeeze over that time.

First Solar currently has a 41 percent short interest with a chart that shows a solid uptrend going back to September 2012. The stock would have to see nearly 9 percent of gains to break out, but as Pavel Molchanov of Raymond James noted, the beginning of the past two years have been strong for solar.

OpenTable (NASDAQ: OPEN): Young tech companies have seen mixed sentiment among traders, but OpenTable has caught the eye of the bulls. The company, which developed software that allows customers to make restaurant reservations through its website and mobile app, has seen a 12 percent gain over the last month.

The chart reveals an ascending channel intact since August 2012. The stock tried to break out in September, but failed, causing it to fall nearly 20 percent but OPEN is once again trying to break out. The 37 percent short interest could send shorts running if that breakout occurs with volume.

Green Mountain Coffee (NASDAQ: GMCR): Traders are not convinced -- at least that is what the latest short interest data shows. After an 87 percent move to the upside since November, the 33 percent short interest in the stock indicates that traders do not expect this move to last much longer.

However, every short seller has horror stories: A stock that continues a strong move higher even though it should have ran out of gas. The chart shows a November gap higher that has held, resulting in a stock that has spent a month basing. Shorts seem to believe that mean reversion resulting from profit taking may knock it down, but the base could break out to the upside if analysts continue their positive sentiment.

On Friday, William Chappell Jr. of SunTrust Robinson Humphrey raised GMCR's price target from $45 to $50 saying that Green Mountain is not seeing a threat from private label K-cups yet.

Posted-In: Analyst Color Long Ideas Analyst Ratings Movers Trading Ideas Best of Benzinga

 

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