“Continue to play!!??” Well, kinda, kinda. When it comes to Wall Street today, it’s the bears who are on the offensive. And so are many of the market’s most shorted stocks. But as the following heavily shorted stocks show on their price charts, there could be better constructed buying opportunities today or just around the corner.
They say a rising tide lifts all boats. And it’s a popular analogy among investors, and for good reason. For the most part it works. Most stocks tend to move in line with the broader market. But this also works both ways, and in more fickle market environments you can almost guarantee that even the most popular ones will be as on Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA) will feel the pinch of bearish sentiment.
But in a market made up of stocks, the most shorted stocks are the Wild West of what’s possible – Dow Jones and others, damn it! So far, however, today has not been one of those days. With broader averages feeling some pressure during the first half on Friday, setting new lows for the week, stocks with strong short interest readily joined in, led by posterboy meme short stocks GameStop (NYSE:GME).
For its part, GME shares are down about 5% in the session and about 28% in the week leading up to next Tuesday quarterly publication. But to be perfectly honest, today’s and the last five days of price action mean absolutely zip, nada, zero as for tomorrow, or rather what GME’s stock price will look like on Tuesday. Stay tuned, along with the rest of Wall & Main Street.
So much fuss, profits and woes as “Gamestonk!!” has given bulls and bears and while these trends should continue, today and from what we are seeing on the price chart, traders should take a position in three of the other most trimmed Consider stocks of the market.
Most Shorted Stocks: Blink Charging (BLNK)
Source: Charts by TradingView
The first of our most shorted stocks is Blink Charging. News last Thursday that Ohio’s Environmental Protection Agency granted Blink 144 fast-charging stations at various locations across the state sent shares higher by more than 17%. A little over a week later, Friday’s intraday lows wiped out all of those gains.
But the weekly price is still developing. And with a possible earnings catalyst next Thursday, investors could see big gains in the wake of the report.
Investors are still waiting for profits here. And that won’t change next week either. More importantly, for this most-shortened stock, investor attention will invariably be on revenue growth and sales forecasts.
Technically, BLNK stock has assembled a nice looking candlestick bottom pattern. Backed by Blink’s 62% retracement level from the pandemic bottom last March and an oversold stochastic crossover signal, this most trimmed stock seems poised to pressure some bears.
For investors willing to throw some venture capital into a sweepstakes, the May $40/$50 bull call spread is looking good. The defined and de-risked vertical is well aligned for a favorable outcome while helping to keep potential drawdowns to less than 8% of BLNK’s shareholding if today’s fee pattern fails.
Source: Charts by TradingView
The next of our top shorted stocks to go long is SunPower. A month ago, the solar company found bulls sweating the company’s mixed earnings report. However, some of the bearish determination may have been attributed to broader market fears in late February. A February 23 low coincided with the tech-heavy Nasdaq’s own challenges.
Since then, SPWR has outperformed many tech-related names and many of the most shorted stocks on the market. Today, the weekly price chart shows strong technical support for further relative and absolute price developments in the coming weeks.
After falling out of a symmetrical triangle pattern, SPWR stock initially formed a weekly hammer low. It failed, but only modestly. Furthermore, the price action continued to hold Fibonacci and support and previous 6-year highs while forming a weekly indoor candlestick. This week, the formation received bullish price confirmation as shares traded through the pattern high of $36.73.
Today the stocks pulled back within the weekly price consolidation. It could be a sign of an upcoming downtrend, but I’m bullish. With stochastics supporting a buy, buying on weakness from newly formed trendline support promises a better outcome for investors in this most shorted stock.
I would suggest using a shorter term call spread of $35/$40 in April. I like the leverage this particular industry offers. It also makes sense as it shouldn’t be long before SPWR is either doing great well with this setup or buckling under extra pressure.
Source: Charts by TradingView
The last of our most cut stocks is fuboTV. FUBO was part of an article at InvestorPlace from a week ago. After stronger-than-expected earnings results in early March, as bears plunged the stock and fended investors off into their own end zone, FUBO looked good for a recovery.
Today, or rather this week, these opportunities have increased in FUBO stock.
Not much has changed in the current fuboTV news. But price action confirming a decently supported W or a double bottomed base has come into the picture. Specifically, a pattern buy signal occurred when this most shorted stock surpassed last week’s inside doji candlestick pattern high.
The weekly stochastics indicator has yet to generate a crossover signal, but it’s so close you can almost taste it. The bottom line is the observation that there is enough evidence to make a wiser bet at FUBO now.
For stronger defense and appreciative bulls that still need to push the bears past the midfield line, i.e. the 50% Fibonacci level near $35.50, to gain more traction of the pattern, the $35 put / $50 seems like Call Collar from May to be a better way to play the game.
At the time of publication, Chris Tyler has no direct or indirect position in any of the securities mentioned in this article.
Chris Tyler is a former listed futures market maker on the American and Pacific stock exchanges. The information offered is based on his professional experience, but is intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. Follow Chris on Twitter for more market insights and related thoughts @Options_CAT and StockTwits.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.