Rebound Candidates: Oversold Stocks with Short Covering

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(Written by Rebecca Lipman. Short data sourced from Yahoo! Finance, all other data from Finviz.)

Looking for rebound candidates? If so, the following list may be an interesting starting point for your search.

Short Covering

We started by considering the value of short seller data. Short selling is an investment technique that allows an investor to make money when the value of a stock falls. Short sellers, however, lose money when the share price rises.

Because short selling requires borrowing, an individual or institution must meet several requirements (including background checks) to engage in short selling. Thus, in general, short sellers are more sophisticated than the average investor.

If short sellers are reducing, or covering, their positions on stock it indicates these sophisticated investors think the stock has more upside than downside to price in.

To find stocks that short sellers are feeling more optimistic about we looked for companies with a short decrease, as a percentage of share float, month over month.

Technically Oversold

Relative Strength Index, or RSI, measures the speed and change of price movements. It is often used as a momentum indicator, with a reading that ranges from 0 to 100.

In general, RSI(14) above 70 signals a stock is overbought (i.e. prices might soon decline), and below 30 signals a stock is oversold (i.e. prices might soon rebound).

For this list we screened stocks for those that are also technically oversold, with a Relative Strength Index (RSI) reading below 40. Again, this means that according to price and volume data, the stock may be ready for a rebound.

The List

We ran a screen on stocks with market caps above $300 million for those meeting both short covering and oversold requirements as detailed above.

The technical indicators suggest this pessimism has been excessive, and short-sellers appear to think these stocks are ready for a price correction, do you agree?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
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1. Columbia Sportswear Company (COLM): Engages in the design, development, sourcing, marketing, and distribution of outdoor apparel, footwear, accessories, and equipment in the United States, Latin America, the Asia Pacific, Europe, the Middle East, Africa, and Canada. Market cap of $1.51B. RSI (14) at 29.03. Shares shorted have decreased from 1.93M to 1.41M month-over-month, a change representing 4.38% of the company's 11.88M share float.

2. EXCO Resources Inc. (XCO): Engages in the exploration, exploitation, development, and production of onshore North American oil and natural gas properties with a focus on shale resource plays. Market cap of $2.18B. RSI (14) at 39.4. Shares shorted have decreased from 17.27M to 12.53M month-over-month, a change representing 2.77% of the company's 171.01M share float.

3. Vera Bradley, Inc. (VRA): Engages in the design, production, marketing, and retail of functional accessories for women under the Vera Bradley brand. Market cap of $1.28B. RSI (14) at 34.71. Shares shorted have decreased from 10.30M to 9.86M month-over-month, a change representing 2.23% of the company's 19.75M share float.

4. Invacare Corporation (IVC): Designs, manufactures, and distributes medical equipment and supplies for the non-acute care environment, including the home health care, retail, and extended care markets. Market cap of $513.52M. RSI (14) at 37.19. Shares shorted have decreased from 2.51M to 1.94M month-over-month, a change representing 1.97% of the company's 28.90M share float.

5. AutoNation Inc. (AN): Operates as an automotive retailer in the United States. Market cap of $4.65B. RSI (14) at 38.09. Shares shorted have decreased from 8.38M to 7.69M month-over-month, a change representing 1.54% of the company's 44.69M share float.

6. REGAL ENTERTAINMENT GROUP (RGC): Operates a theatre circuit in the United States. Market cap of $1.82B. RSI (14) at 30.87. Shares shorted have decreased from 16.48M to 15.22M month-over-month, a change representing 1.48% of the company's 85.08M share float.

7. LogMeIn, Inc. (LOGM): Provides on-demand, remote-connectivity solutions to small and medium-sized businesses, information technology (IT) service providers, and consumers in the United States and internationally. Market cap of $916.73M. RSI (14) at 39.7. Shares shorted have decreased from 2.80M to 2.49M month-over-month, a change representing 1.45% of the company's 21.39M share float.

8. The Children (PLCE): Operates as a children's specialty apparel retailer in North America. Market cap of $1.32B. RSI (14) at 37.86. Shares shorted have decreased from 5.88M to 5.60M month-over-month, a change representing 1.37% of the company's 20.43M share float.

9. Unisys Corporation (UIS): Operates as an information technology (IT) company worldwide. Market cap of $856.40M. RSI (14) at 34.12. Shares shorted have decreased from 3.83M to 3.30M month-over-month, a change representing 1.32% of the company's 40.21M share float.

10. Stonemor Partners LP (STON): Engages in the ownership and operation of cemeteries in the United States. Market cap of $438.73M. RSI (14) at 28.96. Shares shorted have decreased from 391.88K to 170.97K month-over-month, a change representing 1.18% of the company's 18.72M share float. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets


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