8 Oversold, Undervalued Stocks With Bullish Short Trends

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 |  Includes: ASMIY, BBRY, IGTE, IPXL, LHCG, MDCO, PWER, STX
by: Kapitall

Short selling is often used as an indicator for the sentiment surrounding a stock. When shares shorted increases, it indicates that investors are generally more bearish on a stock’s future performance, and vice-versa.

We ran a screen on technically oversold stocks, with RSI(14) below 40, that also appear undervalued relative to earnings growth , with PEG below 1. We screened these stocks for those that have seen significant decreases in shares shorted month-over-month (a bullish indicator).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think short sellers are calling it right on these names? Use this list as a starting-off point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. Power-One Inc. (NASDAQ:PWER): Diversified Electronics Industry. Market cap of $763.75M. RSI(14) at 35.26. PEG at 0.36. Shares shorted have decreased from 29.21M to 24.23M month-over-month, a change representing 5.10% of the company's share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.15). The stock is a short squeeze candidate, with a short float at 24.66% (equivalent to 8.79 days of average volume). The stock has lost 27.75% over the last year.

2. Seagate Technology PLC (NASDAQ:STX): Data Storage Devices Industry. Market cap of $6.27B. RSI(14) at 38.79. PEG at 0.85. Shares shorted have decreased from 15.80M to 9.00M month-over-month, a change representing 1.69% of the company's share float. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.94%, current ratio at 1.77, and quick ratio at 1.5. It's been a rough couple of days for the stock, losing 13.33% over the last week.

3. Medicines Co. (NASDAQ:MDCO): Drug Manufacturers Industry. Market cap of $855.77M. RSI(14) at 38.84. PEG at 0.71. Shares shorted have decreased from 2.67M to 2.39M month-over-month, a change representing 0.75% of the company's share float. The stock has gained 79.23% over the last year.

4. iGATE Corporation (NASDAQ:IGTE): Information Technology Services Industry. Market cap of $910.54M. RSI(14) at 39.82. PEG at 0.89. Shares shorted have decreased from 2.17M to 1.95M month-over-month, a change representing 0.73% of the company's share float. The stock is a short squeeze candidate, with a short float at 6.33% (equivalent to 5.54 days of average volume). The stock has lost 7.46% over the last year.

5. Impax Laboratories Inc. (NASDAQ:IPXL): Drug Manufacturers Industry. Market cap of $1.37B. RSI(14) at 33.85. PEG at 0.83. Shares shorted have decreased from 5.05M to 4.66M month-over-month, a change representing 0.66% of the company's share float. . The stock is a short squeeze candidate, with a short float at 7.54% (equivalent to 6.9 days of average volume). The stock has gained 30.72% over the last year.

6. LHC Group, Inc. (NASDAQ:LHCG): Home Health Care Industry. Market cap of $413.54M. RSI(14) at 38.37. PEG at 0.61. Shares shorted have decreased from 2.09M to 2.02M month-over-month, a change representing 0.45% of the company's share float. The stock is a short squeeze candidate, with a short float at 12.8% (equivalent to 12.95 days of average volume). The stock has gained 1.75% over the last year.

7. Research In Motion Limited (RIMM): Diversified Communication Services Industry. Market cap of $14.63B. RSI(14) at 33.58. PEG at 0.34. Shares shorted have decreased from 30.19M to 28.35M month-over-month, a change representing 0.39% of the company's share float. The stock has lost 49.89% over the last year.

8. ASM International NV (ASMI): Semiconductor Equipment & Materials Industry. Market cap of $1.75B. RSI(14) at 37.59. PEG at 0.40. Shares shorted have decreased from 165.91K to 22.07K month-over-month, a change representing 0.33% of the company's share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has performed poorly over the last month, losing 11.41%.

*Short data sourced from Yahoo Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.