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A problem for shorts is when too many people short the same stock. When a stock is shorted to the point where it becomes an overcrowded trade, it can spark a short squeeze. A short squeeze is a great risk for shorts. A small jump in price and/or some good news being released by the company can spark panic buying by shorts who want to cover their shorts and cut potential losses before other shorts. All of the stocks below have very high levels of short interest. These factors could be making these stocks more likely to rise and see a short squeeze. Longs can profit from short squeezes, so sometimes it pays to invest in highly shorted stocks. For shorts it might not make sense to have the risk of staying short when too many other shorts could cause a squeeze for you. Here are the companies that could see a short squeeze:
Pacific Sunwear of California, Inc. (PSUN) is trading around $3.19. Pacific Sunwear is a specialty retailer based in California. These shares have seen a 52 week high of $6.84 and a low of $2.92 . The 50 day moving average is $3.84 and the 200 day moving average is $4.71. Based on earnings estimates this company is expected to post a loss for 2011, but that hasn't stopped a couple of insiders from making substantial and repeated buys.
Why Pacific Sunwear shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 9.8 million shares short. Based on average volume of just over 1.28 million shares traded per day, it would take about 8 days worth of volume to match the number of shares short.
Veeco Instruments, Inc. (VECO) is trading around $51.13. Veeco is based in New York and manufactures LED products. The 50 day moving average is $48.64 and the 200 day moving average is $42.84. These shares have traded in a range between $29.54 to $53.31 in the last 52 weeks. VECO is estimated to earn about $5.23 per share in 2011 and $4.03 per share for 2012.
Why Veeco shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 11.8 million shares short. Based on average volume of just over 1.3 million shares traded per day, it would take over 11 days worth of volume to match the number of shares short.
RAIT Financial Trust (RAS) shares are trading at $2.44. RAIT is a real estate investment trust, based in Pennsylvania. These shares have traded in a range between $1.30 to $4.75 in the last 52 weeks. The 50 day moving average is $2.70 and the 200 day moving average is $2.18.
Why RAIT Financial shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 13.9 million shares short. Based on average volume of just over 2.2 million shares traded per day, it would take over 6 days worth of volume to match the number of shares short.
Rubicon Technology, Inc., (RBCN) is trading around $28.51. Rubicon manufactures LED products and is based in Illinois. The 50 day moving average is $26.01 and the 200 day moving average is $23.99. These shares have traded in a range between $17.65 to $35.90 in the last 52 weeks.
Why Rubicon shares could see a short squeeze: These shares have been trending higher over the past few months. According to the latest data on shortsqueeze.com, there are about 8.8 million shares short. Based on average volume of just over 500,000 shares traded per day, it would take about 17 days worth of volume to match the number of shares short.
Phoenix Companies, Inc. (PNX) is trading at $2.69. Phoenix is a life insurance and annuity company. The 50 day moving average is $2.52 and the 200 day moving average is $2.35. PNX is estimated to earn about 43 cents per share this year. This puts the PE ratio at about 6. The book value is reported at $9.95.
Why Phoenix shares could see a short squeeze: These shares have been trending higher over the past few months. According to the latest data on shortsqueeze.com, there are about 6.3 million shares short. Based on average volume of just over 400,000 shares traded per day, it would take about 15 days worth of volume to match the number of shares short.
American Superconductor (AMSC) is trading at about $11.85. These shares have a 52 week range of $11.50 and $38.88. The 50 day moving average is $20.83 and the 200 day moving average is $28.32, so the shares are trading well below these key support levels. Earnings estimates for AMSC are about $1.33 per share in 2011, and $1.26 for 2012. Book value is stated at $9.86 per share.
Why American Superconductor shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 12.7 million shares short. Based on recent volume of just over 800,000 shares traded, it would take about 14 days worth of volume to match the number of shares short.
Avanir Pharmaceuticals, Inc., (AVNR) is trading around $4.37. Avanir is developing treatments for disorders of the central nervous system and is based in California. The 50 day moving average is $3.87 and the 200 day moving average is $3.70. These shares have traded in a range between $1.31 to $5.80 in the last 52 weeks.
Why Avanir shares could see a short squeeze: According to the latest data on shortsqueeze.com, there are about 32.8 million shares short. Based on average volume of just over 4.9 million shares traded per day, it would take about 7 days worth of volume to match the number of shares short.
The data is sourced from Yahoo Finance, Shortsqueeze.com, and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.


Disclosure: I am long AMSC, RAS.

Source: 7 Stocks That Could Jump Higher in a Short Squeeze