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Some investors view the put/call ratio as a contrarian indicator – when it reaches extreme levels, it may indicate that a turnaround is imminent. Shares shorted can also be viewed similarly – when a stock becomes highly shorted, it increases the chances of a short squeeze that can cause the stock to rally.

We ran a contrarian screen with these ideas in mind, screening technically oversold stocks [with RSI (14) below 40] for those seeing significant increases in the put/call ratio over the last ten trading days and significant increases in shares shorted month-over-month.

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.


(Click to enlarge)

Do you think these stocks are set to rally? Use this list as a starting-off point for your own analysis.

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

1. Endeavour International Corporation (NYSE:END): Independent Oil & Gas Industry. Market cap of $333.14M. RSI(14) at 32.17. Put/call ratio has increased 137.10% over the last ten trading days (from 1.24 to 2.94). Shares shorted have increased from 2.07M to 3.48M month-over-month, a change representing 5.40% of the company's 26.09M share float. The stock is a short squeeze candidate, with a short float at 11.12% (equivalent to 7.63 days of average volume). The stock has performed poorly over the last month, losing 37.78%.

2. VanceInfo Technologies Inc. (NYSE:VIT): Information Technology Services Industry. Market cap of $616.26M. RSI(14) at 35.28. Put/call ratio has increased 5.76% over the last ten trading days (from 4.34 to 4.59). Shares shorted have increased from 9.30M to 10.18M month-over-month, a change representing 4.32% of the company's 20.39M share float. The stock is a short squeeze candidate, with a short float at 26.5% (equivalent to 6.94 days of average volume). It's been a rough couple of days for the stock, losing 24.01% over the last week.

3. ReachLocal, Inc. (NASDAQ:RLOC): Advertising Agencies Industry. Market cap of $399.57M. RSI(14) at 31.83. Put/call ratio has increased 10.48% over the last ten trading days (from 1.05 to 1.16). Shares shorted have increased from 3.21M to 3.46M month-over-month, a change representing 4.22% of the company's 5.93M share float. The stock is a short squeeze candidate, with a short float at 15.63% (equivalent to 18.09 days of average volume). It's been a rough couple of days for the stock, losing 8.87% over the last week.

4. Vera Bradley Designs, Inc. (NASDAQ:VRA): Textile Footwear & Accessories Industry. Market cap of $1.22B. RSI(14) at 34.81. Put/call ratio has increased 54.11% over the last ten trading days (from 2.31 to 3.56). Shares shorted have increased from 4.47M to 5.27M month-over-month, a change representing 4.05% of the company's 19.74M share float. The stock is a short squeeze candidate, with a short float at 26.71% (equivalent to 9.77 days of average volume). The stock has performed poorly over the last month, losing 25.82%.

5. BancorpSouth, Inc. (NYSE:BXS): Regional Banks Industry. Market cap of $910.88M. RSI(14) at 37.63. Put/call ratio has increased 15.67% over the last ten trading days (from 1.34 to 1.55). Shares shorted have increased from 9.30M to 10.66M month-over-month, a change representing 1.88% of the company's 72.18M share float. The stock is a short squeeze candidate, with a short float at 14.72% (equivalent to 8.82 days of average volume). The stock has lost 13.96% over the last year.

6. Briggs & Stratton Corp. (NYSE:BGG): Diversified Machinery Industry. Market cap of $742.83M. RSI(14) at 34.77. Put/call ratio has increased 103.57% over the last ten trading days (from 0.56 to 1.14). Shares shorted have increased from 8.19M to 9.07M month-over-month, a change representing 1.82% of the company's 48.35M share float. The stock is a short squeeze candidate, with a short float at 18.19% (equivalent to 13.68 days of average volume). It's been a rough couple of days for the stock, losing 7.94% over the last week.

7. RTI International Metals, Inc. (NYSE:RTI): Industrial Metals & Minerals Industry. Market cap of $732.11M. RSI(14) at 31.74. Put/call ratio has increased 10.39% over the last ten trading days (from 0.77 to 0.85). Shares shorted have increased from 4.30M to 4.63M month-over-month, a change representing 1.17% of the company's 28.17M share float. The stock is a short squeeze candidate, with a short float at 15.56% (equivalent to 6.74 days of average volume). It's been a rough couple of days for the stock, losing 6.01% over the last week.

8. GameStop Corp. (NYSE:GME): Electronics Stores Industry. Market cap of $3.03B. RSI(14) at 36.06. Put/call ratio has increased 9.46% over the last ten trading days (from 0.74 to 0.81). Shares shorted have increased from 33.11M to 34.72M month-over-month, a change representing 1.15% of the company's 140.00M share float. Might be undervalued at current levels, with a PEG ratio at 0.68, and P/FCF ratio at 5.91. The stock is a short squeeze candidate, with a short float at 24.93% (equivalent to 8.59 days of average volume). The stock has gained 6.84% over the last year.

*Short data sourced from Yahoo! Finance, options data sourced from Schaeffer’s, all other data sourced from Finviz.

Source: Contrarian Ideas: 8 Oversold Stocks With Bearish Options Sentiment and Short Trends