Shorts on the Run

• Posted by Robert Sinn
• on February 27th, 2012

In a market in which hungry dip buyers chasing their performance benchmarks devour every 50 basis point dip in the major indices ($IWM $QQQ $SPY) as it were their last chance to jump aboard the train before it leaves the station. It is certainly not surprising to see a slew of vicious short squeezes in heavily shorted under the radar names such as:

Click to enlarge (notes on the charts)

$TEA Daily – over 40% short float (was over 70% a few weeks ago when it broke above 20)

 

$ATPG Daily – Over 40% short float, broke out above $8 resistance level on massive volume today.

After the close today a huge battleground stock, $ZAGG, reported earnings which at first blush surpassed all street expectations. With a 50%+ short float it will be interesting to see if the results will be able to ignite a squeeze strong enough to push the stock into a breakout above 11.08 and perhaps even above the 200-day SMA (currently at 11.69):

 

These names all share a few key commonalities: market caps below $1 billion, below 200-day moving averages and mired in long term downtrends, and they would all likely be getting pushed lower in a weak overall market environment. However, this is far from a weak market environment and the shorts are on the run across the board.

There has been a great deal of discussion regarding a market pullback/top and pretty much everyone has been trying to find signs of a top over the past several days. One of the best indications that the rally may be on its last legs will come when short squeezes in the small cap space have run their course and short interest levels in battleground names such as those above have significantly declined – we aren’t there yet.

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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