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The following is a list of small cap stocks with market caps between $100-$300M that have seen a significant decrease in shares shorted between 1/28/2011 - 2/28/2011.

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Given that short sellers seem to think at least some of the bad news is already priced into these stocks, this list might offer a very interesting starting point for investors looking to benefit from the potential rise of these small caps. Full details below.

1. Orexigen Therapeutics, Inc. (NASDAQ:OREX): Drug Manufacturer. Market cap of $137.95M. Shorted shares decreased by 16.25%, from 11.94M to 10.00M shares. The stock has lost 51.27% over the last year.

2. Cost Plus Inc. (NASDAQ:CPWM): Department Stores Industry. Market cap of $217.59M. Shorted shares decreased by 8.94%, from 1.23M to 1.12M shares. The stock is a short squeeze candidate, with a short float at 11.44% (equivalent to 7.08 days of average volume). The stock has gained 335.84% over the last year.

3. QuickLogic Corporation (NASDAQ:QUIK): Semiconductor Industry. Market cap of $188.49M. Shorted shares decreased by 7.99%, from 2.88M to 2.65M shares. The stock is a short squeeze candidate, with a short float at 7.77% (equivalent to 6.18 days of average volume). The stock has gained 59.22% over the last year.

4. Affymax, Inc. (OTCQB:AFFY): Biotechnology Industry. Market cap of $154.74M. Shorted shares decreased by 6.31%, from 2.22M to 2.08M shares. The stock is currently stuck in a downtrend, trading 5.8% below its SMA20, 8.71% below its SMA50, and 7.12% below its SMA200. The stock has lost 74.13% over the last year.

5. Build-A-Bear Workshop Inc. (NYSE:BBW): Toy & Hobby Stores Industry. Market cap of $117.42M. Shorted shares decreased by 5.22%, from 1.34M to 1.27M shares. The stock is a short squeeze candidate, with a short float at 8.95% (equivalent to 11.1 days of average volume). The stock has lost 16.78% over the last year.

Short trends data sourced from Yahoo Finance, short float data sourced from Finviz.

Source: Momentum Ideas: 5 Small Cap Stocks Boosted by Short Covering