Recent pullback in high-fliers coincides with a rise in heavily shorted stocks

|By:, SA News Editor

While much of the attention in recent weeks has been on high-flying momentum stocks falling back to earth, there’s also been a big rally among many of the stocks with largest short positions.

Rallies in heavily shorted stocks are being driven by hedge funds pulling back on all their stock positions, so as bullish positions in high-growth stocks have been ditched, short positions have been closed out as well.

Among the top 10 most shorted stocks, seven have rallied over the last month - with four up by double-digit percentages - even as the S&P 500 has dropped 0.8%: GameStop (GME, +11.5%), US Steel (X, +13.9%), Joy Global (JOY, +7.2%), ADT (ADT, -0.9%), VeriSign (VRSN, -8.6%), Essex Property Trust (ESS, +0.6%), Quest Diagnostics (DGX, +13.1%), Microchip Technology (MCHP, +2.8%), Western Union (WU, -1.9%), Frontier Communications (FTR, +13.6%).