Squeezing the Shorts: Large-Cap Stocks

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By Jonas Elmerraji

BALTIMORE (TheStreet) -- Recently we put our short-squeeze focus on smaller stocks; this week we're going large-cap. With higher trading volumes, more analyst coverage and, frequently, less risk, going long a large-cap short-squeeze play can be a pretty attractive move.

That's because even though it takes more money to move the big names, the risks of getting caught when a trade doesn't go your way are significantly diminished for stocks over the $5 billion threshold.

But what's a short squeeze anyway?

A short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors. As more and more of the short investors buy shares to cover their positions, share prices skyrocket. Almost anything can trigger a short squeeze, including trumping earnings expectations, winning a lawsuit, unveiling a new product and even announcing a management change.

One of the best indicators of just how high a short-squeezed stock could go is the short-interest ratio, which divides shares short by average daily trading volume in order to get a ballpark estimate of the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.

With this in mind, Stockpickr has created a portfolio of stocks this week with high short interest ratios and the catalysts to trigger a squeeze. Here's a look at this week's potential plays.

On Nov. 9, shares of Priceline.com(PCLN Quote) rocketed after the company guided earnings above estimates. With a short ratio above 10, the stock was a textbook short squeeze that trimmed the number of shares short by half by the end of trading yesterday.