Top Oil and Gas Short-Squeeze Stock Plays

Updated from 9:26 a.m. EDT

With all of the recent volatility in the stock market and with oil selling above $100 a barrel, now seems like an excellent time to look at short-squeeze plays among the independent oil and gas stocks.

A short squeeze takes place when, usually on positive news, short-sellers scramble to cover their bearish positions as the stock rises; as the shorts buy in, the stock often rises even more sharply. The primary metric for short squeezes is the short ratio, which is the number of days it would take for a stock's short-sellers to cover their short positions, based on the stock's recent average daily trading volume.

Stockpickr has compiled a list of the sector's most heavily shorted stocks in the Independent Oil and Gas Short-Squeeze Plays.

One of the oil and gas producers with a high short ratio is Rosetta Resources (ROSE Quote), which has a short ratio of 14.9. This means it would take the short-sellers about 15 days to cover their bearish positions on the stock if trading volume stays constant. Rosetta last month reported a 32% rise in fourth-quarter earnings. The stock has a forward price-to-earnings (P/E) ratio of 12 and a P/E-to-growth (PEG) ratio of 1.3.

Rosetta is also favored by Robert Rodriguez, manager of the FPA Capital Fund. Rodriguez also likes Avnet (AVT Quote), which has a short ratio of 2.8, Ensco International (ESV Quote), which has a short ratio of 3, and Trinity Industries (TRN Quote), which has a 7.6 short ratio.

Another heavily shorted stock is Penn Virginia (PVA Quote), a producer of crude oil and natural gas that has a short ratio of 6. The company last month reported adjusted fourth-quarter earnings of 33 cents a share, up from 19 cents a year ago, as well as a 25% increase in oil and gas production. The stock has a forward P/E of 14.6 and a PEG of 1.1. It even pays a small yield of 0.6%.

Penn Virginia shows up in the portfolio of the Turner Emerging Growth Fund, a five-star Morningstar-rated fund managed by Frank Sustersic. Turner also holds shares of Deckers Outdoor (DECK Quote), with a 5.6 short ratio, RTI International Metals (RTI Quote), with a 7.2 short ratio, and Oceaneering International (OII Quote), with a 1.3 short ratio.

Pioneer Natural Resources (PXD Quote), an explorer and producer of oil and gas in the U.S., South Africa and Tunisia, has a short ratio of 7.3. The company just presented at the Bear Stearns Global Oil & Gas Conference on March 19. The stock has a forward of P/E of 10.8, a PEG of 1.8 and a yield of 0.6%.

Pioneer is part of the portfolio of the BlackRock Global Resources Investors Fund, a long-term capital growth fund that also owns shares of Consol Energy (CNX Quote), with a 1.8 short ratio, Arch Coal (ACI Quote), with a 1.9 short ratio, and Massey Energy (MEE Quote), with a 2.8 short ratio.

For a list of all the 10 stocks, check out the Independent Oil and Gas Short-Squeeze Plays at Stockpickr.com.