It’s September and maybe proactively, bulls and apes alike are backing away from stocks of all kinds recently. Today though, and hedging that skittish behavior are three of the market’s most-shorted stocks. They have been scoured for “high and low” on the price charts to offer investors more secure buying opportunities.
“Boo!” Moving toward Friday’s closing bell, it was a fairly uniform week of trimming profits for the bellwether averages and most places in-between. And that includes stocks with high short interest.
From the market’s most-shorted stocks on a dollar basis such as Square (NYSE:SQ) or Advanced Micro Devices (NASDAQ:AMD) or a more meme-worthy GameStop (NYSE:GME), September is off to an auspicious start.
In the scheme of things, of course, and given where those shares were just a year ago, the damage is modest. But with the broader market just off record highs and sporting double-digit gains, September 2021 undoubtedly has the type of ammo to be bearishly complicit with seasonal tendencies.
Still, should the possibility of a more menacing bearish cycle include the market’s most-shorted stocks? Maybe not.
- Big 5 Sporting Goods (NASDAQ:BGFV)
- SunPower Corp (NASDAQ:SPWR)
- Intercept Pharmaceuticals (NASDAQ:ICPT)
“Booyah!” To steal a line from CNBC’s market cheerleader James Cramer, and a second catchphrase as well, “there’s always a bull market somewhere,” I’m selectively upbeat. After searching high and low, as well as the middle ground of the market’s most-shorted stocks price charts, here are three which are ready for bulls and apes alike.
Most-Shorted Stocks to Buy: Big 5 Sporting Goods (BGFV)
Source: Charts by TradingView
The first of our most-shorted stocks to buy is big box athletics retailer Big 5 Sporting Goods. BGFV sits atop the market’s list of high short interest stocks with 38% of its float shorted. To be fair, that could raise a red flag. However, I’m positive on BGFV stock for a couple reasons.
First, Big 5 just recently pulled off another wildly strong earnings report which topped Street views and delivered big-time growth. Also there’s BGFV stock’s price chart that has our attention.
Since reporting its quarterly results, this most-shorted stock has put together a solid monthly entry for an offensive run in the shares. Technically, BGFV stock has pulled back near the 50-yard line of its well-supported, high-level V-shaped corrective base formed of its all-time-highs.
With stochastics similarly positioned near midfield and neutralized and shares also resting on top of August’s confirmation candlestick – the V stands for victory for today’s Big 5 buyers.
To tackle new highs this year, going long this most-shorted stock with an actively-managed October $25/$35 collar is a great starter position to consider.
SunPower Corp (SPWR)
Source: Charts by TradingView
SunPower Corp is the next of our most-shorted stocks to buy. Last month SPWR issued mixed fourth-quarter results. But I’m upbeat on this alt-energy solar play as it remains well-positioned as an infrastructure play under the Biden administration.
While we continue to wait on Congress to reach a $1 trillion-plus agreement, SPWR stock also stands to benefit from new tax credits for solar manufacturing.
Today, this most-shorted stock maintains a resident population of bears 18% of SPWR’s float.
Technically, SunPower is our middle-ground pick. Shares have been in a rather large bear market cycle since February, and which Friday resulted in a double-bottom pattern forming in-and-around the 50% and 62% Fibonacci retracement levels.
Combined with an oversold and bullishly-crossed stochastics setup, this middle-of-the-pack most-shorted stock stands out as one to buy using a December $22/$30 collar.
Most-Shorted Stocks to Buy: Intercept Pharmaceuticals (ICPT)
Source: Charts by TradingView
The last of our most-shorted stocks to purchase are shares of Intercept Pharmaceuticals. Bears number roughly 32% of ICPT stock’s float and they’ve been on the right side of trade for years. Today though, shares are offering bullish investors a binary catalyst, off and on the price chart, which favors buyers.
On the business front Intercept is all about its liver disease obeticholic acid (OCA) treatment for nonalcoholic steatohepatitis (NASH).
As Motley Fool recently noted, there’s no sugarcoating this make-or-break opportunity. Drug approval would be huge for an estimated $35 billion market with no competition at this point in time.
Technically, this most-shorted stock was intercepted by bears more than a decade ago following a brief Hail Mary offensive play by bulls. Right now however, ICPT shares are positioned in a lifetime double-bottom pattern.
Yeah, we’re looking really low in ICPT stock. But don’t think for a second shares can’t crater further. No OCA approval – no dice!
Bottom line, analysts are positive this most-shorted stock has the goods. And technically, ICPT has formed a classic and rather significant bottoming pattern. Still, it’s important to remember the make-or-break implications in their entirety.
I’d look well past tomorrow and go with the 2023 January $30/$50 bull call spread to make the most of a leveraged and realistic Hail Mary, without getting sacked for a massive loss should this most-shorted stock not play out as intended.
On the date of publication, Chris Tyler holds long positions (either directly or indirectly) Advanced Micro Devices (AMD) and its derivatives. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @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.