Short Squeeze Signal Pegs Profitable Trading Ideas

The majority of the stocks are outperforming the SPY so far in 2019

Back on Dec. 26, Schaeffer's Senior Quantitative Analyst Rocky White highlighted a list of stocks that could rally in the new year in his weekly Indicator of the Week column. The theory was that heavily shorted equities that struggled in 2018 could see a short squeeze in the start of 2019, as bearish bettors waited until the turn of the calendar year to cover their positions, and thereby delaying paying taxes by another 12 months.

Discounting NutriSystem (NTRI), which is being bought by Tivity Healthy (TVTY), there were 29 stocks that had more than 10% of available float dedicated to short interest and were down at least 10% in 2018. So far in the new year, 72.4% of those stocks are boasting a year-to-date gain in excess of the SPDR S&P 500 ETF Trust's (SPY) 1.5% positive return.

Of those 29 stocks, Roku Inc (NASDAQ:ROKU) has seen the biggest return, up more than 26%. Today, the shares have surged 22.4% to trade at $41.29, after the streaming giant forecast 27 million active users in the fourth quarter -- a 40% year-over-year rise. ROKU stock finished 2018 down 47.3%, with roughly 46% of its float sold short. Here's a complete list of the YTD returns for the 29 stocks in the study, sorted by their current Schaeffer's Volatility Scorecard (SVS) rank.