10 Short Squeeze Candidates If The Market Rally Continues

Despite a rising number of U.S. coronavirus (COVID-19) cases and deaths, the SPDR S&P 500 ETF Trust SPY has rallied 12.6% in the past two weeks. The country may not yet be through the worst of the coronavirus outbreak, but investors may already see a light at the end of the tunnel.

If the recent rally continues, short sellers that bet on a prolonged market sell-off could be caught in a tricky situation. S3 Partners analyst Ihor Dusaniwsky said Monday that short sellers are already feeling some major pain in the past couple of weeks. If the market rally continues, he said traders could soon see some significant short squeezes.

“Stocks that performed well and were ‘losers’ for the short side will be in line for a squeeze as shorts take on even more losses if a market rally truly takes hold,” Dusaniwsky said.

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Overall, the S&P 500 is still down 9.8% since March 1, so there aren’t many stocks that have been losers for short sellers in that time. However, Dusaniwsky said each of the following stocks have cost short sellers at least $100 million in losses since March 1, and each has averaged more than $600 million in short interest over that time.

10 Short Squeeze Candidates

Here are stocks that Dusaniwsky said are short squeeze candidates if the market rally continues, sorted by price performance since March 1:

1. Citrix Systems, Inc. CTXS, +41.3%
2. Moderna Inc MRNA, +29.1%
3. Zscaler Inc ZS, +19.2%
4. DIGITAL RLTY TR/SH DLR, +17.6%
5. Hormel Foods Corp HRL, +16.2%
6. General Mills, Inc. GIS, +15%
7. Kroger Co KR, +12.2%
8. Teladoc Health Inc TDOC, +11%
9. Zoom Video Communications Inc ZM, +10.9%
10. Gilead Sciences, Inc. GILD, +8.8%

See Also: Stock Borrow Costs: A Short Seller's Worst Enemy

Benzinga’s Take

It’s worth noting that as the market has rallied, many of these top-performing stocks in March have cooled, seemingly lowering the chances of a short squeeze in the near term. The three stocks mentioned above with the most gains so far in the month of April are General Mills, Moderna and Digital Realty Trust.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Photo via Wikimedia.