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Christian Tharp, CMT

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Is Vivus About To Get Squeezed?

Investor sentiment on Vivus (NASDAQ: VVUS) is low. The data seems to bear that out.

Currently, 35.97 percent of the float on the stock is sold short, suggesting an extreme level of bearishness.

A full 80 percent of the analyst’s ratings on Vivus are either a Hold or Sell, with the overall average recommendation being a moderate sell.

The stock chart of Vivus doesn’t invoke massive confidence either.

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While the short interest, analyst’s opinions and the recent performance are certainly troubling, there is one reason to be somewhat optimistic on the stock.

Recent earnings estimate activity has actually been positive, even in the face of such widespread pessimism. Estimates have moved upward from $(0.36) per share to $(0.33) per share.

All of that being said, a short-covering rally is certainly a possibility for Vivus, especially if investors embrace the positive earnings estimate revision picture which seems to suggest that the stock could definitely move higher in the weeks ahead.

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As mentioned above, the charts do not look good.

After peaking near $15 last summer, the stock has enjoyed a very nice decline down into the $4 range.

One might think a push back above the $6 level, with a steady increase in volume, could be a possible sign of short squeeze. Could the company's August 4 earnings release be the catalyst?

The stock closed on Friday at $5.27.

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