US Markets - The Long and Short of It - February 20, 2018

publication date: Feb 20, 2018

Cerundolo Investment Research    

US Markets Update  

Volume 2, Issue 5
February 20, 2018

Long Ideas:

Items of Interest: 

  • The stocks that make this report are those that have the potential to be “squeezed” with further strength in the underlying stocks. These stocks are called “Type 1” short squeeze or buy recommendation.
  • Using the data compiled by a friend and former colleague, Phil Erlanger of Erlanger Research Co, we look at the following inputs for a short squeeze candidate:
    • High technical rank = A nonlinear modeling of each stocks relative strength to the S&P 500
    • High short intensity rank = Sentiment measure of the short selling intensity of a stock. It compares the current amount of short selling and ranks it to a stocks historical range.
    • Short interest ratio >= 1.5 days to cover. The short Ratio is calculated using the same variables monthly number of shares short divided by the average daily volume. Erlanger uses a 12-month weighted average daily volume instead of the traditional 20 days. This allows a smoother calculation and avoids misleading ratios during volatile market conditions and individual anomalies like analyst recommendations and earnings reports. The short ratio will change on a monthly basis as the new short interest numbers are released.
  • Of the 190 stocks classified as a type 1, we have identified 55 that screen well in our model and are worthy long candidates. A list of these stocks is found on page 2 and sorted by industry group.
  • On pages 3 and 4 we highlight two stocks, NTB and GRUB that in recent weeks were on the Type 1 short squeeze list, and remain there today. As you will see, both stocks have since had a significant rally in a short amount of time as both saw buying interest come in and we suspect shorts were covering.  In the next release of short interest data from the exchanges, we will be able to determine how much of the rally was attributed to the shorts getting squeezed.

For more information on Erlanger Research Co. please email me at [email protected]

DOWNLOAD LONG IDEAS HERE 

 

Short Ideas:

Items of Interest: 

  • In the following pages we have short recommendations based on data compiled by a friend and former colleague, Phil Erlanger of Erlanger Research Co. The criteria that qualify a stock as a long squeeze are as follows:
    • Low technical rank = A nonlinear modeling of each stocks relative strength to the S&P 500
    • Low short intensity rank = Sentiment measure of the short selling intensity of a stock. It compares the current amount of short selling and ranks it to a stocks historical range.
    • Low short interest ratio = It looks for stocks with a low days to cover < 4 days.
  • When you combine all this, we get a list of stocks that basically have weak technical structure and not many shorts are involved. This is important because if we do have a stock that may get a short-term move up, the odds of a short squeeze are greatly reduces because of the overall weak trend structure of that issue and the low days to cover.
  • We also review those stocks where there are a fair amount of shorts involved and the shorts are correct in their bet.
  • For this report, we reviewed all 874 stocks that met the criteria above and have come up with 43 that we feel have a good setup for the short side. A list of these stocks is found on page 2 and sorted by industry group.
  • Please review the chart on page 3 where we describe the indicators used for most of the charts as well as a risk/reward range bar based on price target and stop.
    •  For more information on Erlanger Research co. please email me at [email protected].

       

    DOWNLOAD SHORT IDEAS HERE 

     

     

     

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