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TheStreet Open House

10 Stocks With Huge Rebound Potential

WINDERMERE, Fla. ( Stockpickr) -- The U.S. stock market has been in a state of destruction recently. The Dow Jones Industrial Average has dropped for an amazing six consecutive weeks for first time since 2002. During May, the S&P 500 witnessed its first down month since August of 2010. Adding insult to injury, May also registered as the first month since December of 2010 that stock mutual funds saw net outflows of cash.

According to Strategic Insight, investors withdrew $2.7 billion more than they deposited into stock-based mutual funds during May, which broke the four-month streak of net deposits that started in January. So who were the winners in the investment world? Bond funds and funds that purchase foreign based stocks saw the most net deposits, as investors dumped U.S. equities with little regard.

I think it's safe to assume that market players have been dumping stocks ahead of the end of the Federal Reserve's quantitative easing program, also dubbed as QE2. Savvy traders at mutual and hedge funds know that once Chairman Ben Bernanke is done with his permanent open market operations, or POMO, then the markets will quickly lose a system that was awash in liquidity. Those same traders now fear that the Fed has run out of bullets or creative options to keep stocks trending higher, in the face of a weaker economy.

Related: 17 Breakout Stocks to Watch

Of course, we don't know if there will be a QE3 yet, since the Fed said Wednesday that it will let the massive bond-buying program expire in just days. That isn't keeping market gurus from speculating that QE3 is almost a foregone conclusion. Bond king Bill Gross was making the rounds Wednesday saying that at the next Jackson Hole meeting, Bernanke will likely hint at a third round of bond purchases, or QE3.

As I always like to say, don't worry so much about the headlines and obsessions of the financial media. Just worry about the trend that's clear and present, and more important, focus on how stocks react to the news. That said, I think it's prudent to start stalking the market for stocks that have the potential to rebound huge if we see some follow through off of Tuesday's bounce. It's even more important to search for stocks that are heavily shorted or that have been beaten down big and might be candidates for big spikes in the coming weeks.

Here's a look at a number of stocks that have the potential to rebound, including some with short-squeeze potential.

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