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At this time of year, it makes sense to seek out select stocks trading near 52 week lows. The strategy of buying beaten-down stocks just a few weeks before the end of the year often results in solid gains, because stocks that many investors are underwater on, are often sold down even more for tax loss purposes. Sometimes after holding a stock that has dropped in value, investors want to sell even if it's not a great time to do so. The tax loss selling can exacerbate the declines in an already oversold, undervalued stock at this time of year, and that can be a great opportunity.

Another factor to consider is short interest. If you can find stocks that are seeing tax-loss selling that also have a high level of short interest, this can add even more fuel to the rally in January. When a stock is shorted to the point where it becomes an overcrowded trade, it can spark panic buying (a short squeeze). I have researched a number of companies that fit the profile for a strong gains in January that could surge on both the end of tax loss selling and a short covering rally.

Historically, this strategy can pay off big if you start buying these types of stocks right now and then hold them through at least the first week of January. In addition, these stocks are all trading below $8 per share and could see very large percentage gains due to the low price per share. Here are a few stocks that have had a tough year, but should rebound sharply in the next 3 weeks as we head into 2012:

Cenveo, Inc. (NYSE:CVO) is trading around $3.26. CVO is a printing company, based in Connecticut. The 50-day moving average is $3.25, and the 200-day moving average is $4.98. These shares have traded in a range between $2.64 to $6.85 in the last 52 weeks. Earnings estimates for CVO are for a profit of 47 cents per share in 2011 and 63 cents for 2012. According to the latest data on shortsqueeze.com, there are about 6.7 million shares short. Based on average volume of just about 309,000 shares traded per day, it would take about 22 days worth of volume to match the number of shares short. I believe the shorts are getting sloppy here. This company is profitable, and insiders have been buying substantial amounts of stock recently. This is my top pick for a major rally fueled by the end of tax loss selling in the next couple of weeks, followed by a significant short sqeeze rally around the first week of January. CVO shares are already showing early signs of a potentially large rebound. This stock will probably trade up to around $4.75 in January which is close to the 200-day moving average.

Sealy Corp. (ZZ) shares are trading at $1.77. Sealy is a maker of mattresses and is based in North Carolina. These shares have traded in a range between $1.09 to $3.06 in the last 52 weeks. The 50-day moving average is $1.63, and the 200-day moving average is $2.16. Earnings estimates for Sealy are for a profit of 7 cents per share in 2011 and 12 cents for 2012. This stock was trading around $3 earlier this year and insiders recently bought stock. According to the latest data on shortsqueeze.com, there are about 13.4 million shares short. Based on average volume of just about 400,000 shares traded per day, it would take about 33 days worth of volume to match the number of shares short. This stock is well off the lows, so the gains might only be about 15% from here.

Vantage Drilling (NYSEMKT:VTG) shares are trading at $1.10. Vantage is an offshore drilling company. These shares have traded in a range between 97 cents to $2.26 in the last 52 weeks. The 50-day moving average is $1.23, and the 200-day moving average is $1.59. The book value is stated at $2.42. Vantage has very experienced management and a number of insiders have been buying substantial amounts of stock this year. This stock is trading close to the 52 week low and has a fair amount of short interest. According to the latest data on shortsqueeze.com, there are about 10.1 million shares short. Based on average volume of just about 1.3 million shares traded per day, it would take about 8 days worth of volume to match the number of shares short. A spike to the $1.50 level in January would be nearly a 40% gain from current levels.

ATP Oil and Gas Corp. (ATPG) is trading at $6.41. ATPG is an independent oil and gas company, based in Texas. These shares have traded in a range between $5.53 to $21.40 in the last 52 weeks. The 50-day moving average i $8.45 and the 200-day moving is $13.53. Earnings estimates for ATPG are expected to go from a loss in 2011 to a profit of $1.49 per share in 2012. The higher revenues and margins for 2012 are due to higher production coming from oil wells in the Gulf of Mexico. Insiders have been buying significant amounts of ATPG stock in recent weeks. This stock is heavily shorted, and any good news could cause a major rally. According to the latest data on shortsqueeze.com, there are about 19.3 million shares short. Based on average volume of just about 2.7 million shares traded per day, it would take about 7 days worth of volume to match the number of shares short

Supervalu (NYSE:SVU) shares are trading at $7.28. Supervalu is a leading grocery store company and is based in Minnesota. The 50-day moving average is about $7.64 and the 200-day moving average is about $8.32. The 52 week range is $6.26 to $11.77. Earnings estimates for SVU are $1.22 per share in 2011 and $1.25 for 2012 so the PE ratio is about 6 on these shares. Supervalu pays a dividend of about 35 cents per share which is equivalent to a yield of 4.3%. According to the latest data on shortsqueeze.com, there are about 50.7 million shares short. Based on average volume of just about 4.6 million shares traded per day, it would take about 11 days worth of volume to match the number of shares short. I don't expect as much of a gain with this stock (compared to the others here) but it could easily jump 10 to 15%.

Furniture Brands International (FBN) shares are trading at $1.04. FBN is a furniture manufacturer and is based in Missouri. The 50-day moving average is $1.53 and the 200-day moving average is about $3.28. These shares have traded in a 52 week range between 88 cents to $5.43. According to the latest data on shortsqueeze.com, there are about 3.6 million shares short. Based on average volume of just about 577,000 shares traded per day, it would take about 6 days worth of volume to match the number of shares short. This stock has been pounded in 2011, and now trades for about 1/5th of the 52 week high. Because this stock is trading at such a low level, I expect a very large percentage gain in the next 3 weeks and this stock could jump to about $1.50 or more in January.

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.

Source: 6 Stocks Below $8 Poised For Major Gains In 3 Weeks