What Could Squeeze Shorts Next Week

Next week could see some pretty violent short squeezes because beginning Monday, the SEC gets rid of the major exception to the rules it put through two years ago to stop naked short-selling.

I haven't read a word about this anywhere but here. But on Monday, if you are using one of several grandfathered exceptions that allowed you to stay naked short, including one that said basically if you were short it before you could stay that way and another that allowed you to hide behind options rules, you have to cover.

That means stocks that are or have been heavily shorted over and over, like a Taser (TASR - commentary - Cramer's Take) or an Overstock (OSTK - commentary - Cramer's Take) or some of these homebuilders, could see a big squeeze starting Monday.

I don't like to recommend ideas based on short-bashing. It is a sucker's game; lots of stocks are heavily shorted because they deserve to go down.

I think that you could see some wild moves and I wanted you to know why that could be the case and so you can game it accordingly.

TheStreet.com and James J. Cramer, its co-founder and major shareholder, were subpoenaed in February 2006 in connection with an SEC investigation into allegations by Overstock that a research firm, Gradient Analytics, engaged in a conspiracy with short-sellers (including Rocker Partners, which at the time owned a small stake in TheStreet.com, the publisher of this Web site) to manipulate Overstock's share price. The SEC agreed that it would not, at that time, seek to enforce the portions of the subpoenas issued to the company and other media firms, including Dow Jones, that concern communications between journalists and their sources.

At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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