4 Short Squeeze Stocks to Trade

Submitted by theStockMasters... on Wed, 12/12/2012 - 03:59

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Any upside in the major indexes could send these 4 stocks flying.

The S&P 500 and the Down Jones Ind. finished 0.6% higher today despite zero progess made avoiding the 'Fiscal Cliff'. Four stocks did finish higher today and they are loaded with short interest. Those names are Zillow Inc. (Z), RadioShack Corp. (RSH), J.C. Penny Company, Inc. (JCP) and wildcard candidate Pandora Media Inc. (P). If the rally in equities continues the short sellers are going to have to switch course and send those four stocks higher.

Shares of Zillow Inc. (Z), RadioShack Corp. (RSH), J.C. Penny Company, Inc. (JCP) all jumped 4% on no credible news or events. Those 3 stocks are heavily shorted and the move higher corresponded with the major stock indices. Mastery believes that trend could continue for JCP, RSH, and Z. The shot in the dark is Pandora as the Street continues to punish the company and send its share price lower.

When a heavily shorted stock jumps on a single day the short sellers are forced to exit. The traders that are short on the given stock then have to liquidate and cover their position by buying back the stock. If enough short sellers buy back the stock, the price is pushed even higher and off to the races we go. We are also going with household name stocks that trade with a decent amount of volume. This allows you to get out if the stock isn't moving the direction you want.

Here is the 411 on these 4 possible short-squeeze stock plays:

Zillow Inc (Z) shares enjoyed a 4.78% rally today and closed at $28.50. Zillow's short float is at an outstanding 32%. Zillow shares have traded between $21.41 and $46.86 over the past 12 months. Keep in mind the Big Z is now 25% from its 52-week low.