8/10/2012
By Charles Payne

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Fanciful Facades?

Recently, Skull Candy (SKUL) shares zoomed but so did First Solar (FSLR), Tesla (TSLA), Blue Nile (NILE) and Green Mountain (GMCR).  What these stocks all have in common are gigantic short positions.  Sure, all have individual issues, but like wounded gazelle; have been targeted for complete death by the shorts.  The shorts are very smart and very determined but also believe their own hype more than they should.  Overkill is not in their vernacular. 

There is a famous line on Wall Street that shorts go out on their shields and right now we better line up a lot of shields.  Check out highshortinterest.com and the majority of names you'll see are among the biggest winners in the market since last week.  On Aug 7th, BSFT is up 35% in part to a massive short squeeze- almost 40% of the float was short coming into today's session even though the shares were down more than 50% since April.  Call it greed, call it being too smart or call it basis animal instincts.  In the market these days, shorts injure a stock and then chase it as investors flee with the rest of the herd.

I like Mattress Firm (MFRM) as the next major short squeeze.

It beat the street by 230% in its first earnings report then only 16% in second coupled with a price war in space, the stock has been crushed.  Recently, rivals have posted strong results and shares have begun to rebound.  In the meantime, insiders are nibbling.  The PEG ratio is 0.79 and stock is breaking through key moving averages today.  My target is $36.00.

Charles Payne
Wall Street Strategies