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Shares shorted is a great resource for checking the market’s sentiment on a stock. If a stock sees increases in shares shorted over time, short sellers are becoming more pessimistic on its outlook, and vice versa.

Short trends are especially noteworthy if they are backed other groups of investors, such as hedge funds.

When a stock rallies while short sellers and institutional investors are becoming more pessimistic, it can mean that sellers have been wrong and they’ll soon buy with the trend, or it can mean that the market has not yet recognized what the sellers have.

We ran a screen on stocks rallying above their 20-day, 50-day, and 200-day moving averages for those with pessimistic trends from short sellers (increases in shares shorted) month-over-month and institutional investors in the current quarter.

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.

Do you think “Smart Money” investors are wrong, or do they know something the market hasn’t recognized yet? Use this list as a starting-off point for your own analysis.

List sorted by increase in shares shorted.

1. CapitalSource Inc. (NYSE:CSE): Provides various financial products to small and medium-sized businesses in the United States. Market cap of $1.82B. The stock is currently trading at 5.30% above its 20-Day SMA, 5.74% above its 50-Day SMA, and 5.09% above its 200-Day SMA. Net institutional shares sold over the current quarter at 32.2M, which is 13.49% of the company's 238.67M share float. Shares shorted have increased from 8.10M to 10.81M month-over-month, a change representing 1.14% of the company's 238.67M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.35). The stock has had a couple of great days, gaining 5.4% over the last week.

2. Novellus Systems, Inc. (NASDAQ:NVLS-OLD): Develops, manufactures, sells, and supports equipment used in the fabrication of integrated circuits. Market cap of $2.76B. The stock is currently trading at 11.77% above its 20-Day SMA, 18.14% above its 50-Day SMA, and 24.82% above its 200-Day SMA. Net institutional shares sold over the current quarter at 8.4M, which is 13.44% of the company's 62.50M share float. Shares shorted have increased from 5.95M to 6.91M month-over-month, a change representing 1.54% of the company's 62.50M share float. The stock has had a couple of great days, gaining 6.48% over the last week.

3. Sunoco, Inc. (NYSE:SUN): Through its subsidiaries, refines and markets petroleum products, and manufactures chemicals in the United states. Market cap of $4.37B. The stock is currently trading at 5.07% above its 20-Day SMA, 9.47% above its 50-Day SMA, and 5.84% above its 200-Day SMA. Net institutional shares sold over the current quarter at 11.3M, which is 10.61% of the company's 106.47M share float. Shares shorted have increased from 8.29M to 9.61M month-over-month, a change representing 1.24% of the company's 106.47M share float. The stock has had a couple of great days, gaining 5.9% over the last week.

4. MBIA Inc. (NYSE:MBI): Provides financial guarantee insurance and related reinsurance, advisory, and portfolio services, as well as investment management services to public finance and structured finance markets. Market cap of $2.29B. The stock is currently trading at 7.94% above its 20-Day SMA, 28.61% above its 50-Day SMA, and 34.45% above its 200-Day SMA. Net institutional shares sold over the current quarter at 12.2M, which is 9.29% of the company's 131.27M share float. Shares shorted have increased from 28.49M to 29.89M month-over-month, a change representing 1.07% of the company's 131.27M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.51). The stock is a short squeeze candidate, with a short float at 15.99% (equivalent to 11.49 days of average volume). The stock has had a good month, gaining 59.97%.

5. Ingram Micro Inc. (NYSE:IM): Distributes information technology (NYSE:IT) products and supply chain solutions worldwide. Market cap of $2.81B. The stock is currently trading at 3.49% above its 20-Day SMA, 2.06% above its 50-Day SMA, and 0.47% above its 200-Day SMA. Net institutional shares sold over the current quarter at 6.5M, which is 8.96% of the company's 72.52M share float. Shares shorted have increased from 2.97M to 3.96M month-over-month, a change representing 1.37% of the company's 72.52M share float. The stock has had a couple of great days, gaining 8.67% over the last week.

6. Constant Contact, Inc. (NASDAQ:CTCT): Provides on-demand email marketing, social media marketing, event marketing, and online survey solutions primarily in the United States. Market cap of $702.76M. The stock is currently trading at 0.46% above its 20-Day SMA, 7.65% above its 50-Day SMA, and 1.42% above its 200-Day SMA. Net institutional shares sold over the current quarter at 2.0M, which is 6.90% of the company's 29.00M share float. Shares shorted have increased from 6.26M to 6.82M month-over-month, a change representing 1.93% of the company's 29.00M share float. The stock is a short squeeze candidate, with a short float at 23.5% (equivalent to 11.93 days of average volume). The stock has had a good month, gaining 18.21%.

7. McCormick & Schmick's Seafood Restaurants, Inc. (NASDAQ:MSSR): Operates seafood restaurants in the upscale dinning segment. Market cap of $130.29M. The stock is currently trading at 0.48% above its 20-Day SMA, 8.85% above its 50-Day SMA, and 8.93% above its 200-Day SMA. Net institutional shares sold over the current quarter at 808.6K, which is 6.51% of the company's 12.43M share float. Shares shorted have increased from 1.21M to 1.91M month-over-month, a change representing 5.63% of the company's 12.43M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.21). The stock has lost 3.63% over the last year.

8. Meredith Corp. (NYSE:MDP): Engages in magazine publishing and related brand licensing, television broadcasting, integrated marketing, interactive media, and video production businesses in the United States. Market cap of $1.50B. The stock is currently trading at 8.0% above its 20-Day SMA, 18.18% above its 50-Day SMA, and 15.99% above its 200-Day SMA. Net institutional shares sold over the current quarter at 2.3M, which is 6.30% of the company's 36.49M share float. Shares shorted have increased from 6.48M to 7.03M month-over-month, a change representing 1.51% of the company's 36.49M share float. The stock is a short squeeze candidate, with a short float at 25.4% (equivalent to 9.58 days of average volume). The stock has had a couple of great days, gaining 8.39% over the last week.

9. Ethan Allen Interiors Inc. (NYSE:ETH): Engages in the design, manufacture, sourcing, sale, and distribution of various home furnishings and accessories. Market cap of $696.44M. The stock is currently trading at 10.94% above its 20-Day SMA, 20.61% above its 50-Day SMA, and 23.52% above its 200-Day SMA. Net institutional shares sold over the current quarter at 1.3M, which is 5.76% of the company's 22.55M share float. Shares shorted have increased from 4.08M to 4.38M month-over-month, a change representing 1.33% of the company's 22.55M share float. The stock is a short squeeze candidate, with a short float at 16.81% (equivalent to 12.55 days of average volume). The stock has had a couple of great days, gaining 10.63% over the last week.

10. Select Medical Holdings Corporation (NYSE:SEM): Through its subsidiary, Select Medical Corporation, operates specialty hospitals and outpatient rehabilitation clinics in the United States. Market cap of $1.31B. The stock is currently trading at 3.23% above its 20-Day SMA, 4.62% above its 50-Day SMA, and 9.50% above its 200-Day SMA. Net institutional shares sold over the current quarter at 1.9M, which is 5.35% of the company's 35.49M share float. Shares shorted have increased from 4.02M to 4.38M month-over-month, a change representing 1.01% of the company's 35.49M share float. The stock has had a good month, gaining 16.43%.

11. Corporate Executive Board Co. (EXBD): Provides business insights, data, and tools to business executives and professionals in the United States, Europe, and internationally. Market cap of $1.30B. The stock is currently trading at 2.66% above its 20-Day SMA, 6.29% above its 50-Day SMA, and 4.85% above its 200-Day SMA. Net institutional shares sold over the current quarter at 1.7M, which is 5.13% of the company's 33.13M share float. Shares shorted have increased from 1.73M to 2.10M month-over-month, a change representing 1.12% of the company's 33.13M share float. The stock is a short squeeze candidate, with a short float at 6.33% (equivalent to 9.15 days of average volume). The stock has had a couple of great days, gaining 6.12% over the last week.

*Institutional data sourced from Fidelity, short data from Yahoo! Finance, all other data from Finviz.

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

Source: 11 Rallying Stocks With Bearish Institutional And Short Trends