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TheStreet Open House

10 Stocks With Huge Rebound Potential

North American Palladium

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Another beaten-down stock with a notable short interest that has the potential to rebound sharply is North American Palladium (PAL), a diversified precious metals company that owns two mines and various mineral properties. The company is in the business of exploring and mining palladium, platinum, gold and certain base metals. This stock has been crushed in the past three months, with shares down over 37%, and for the year, PAL is off by a whopping 44%

Palladium is rare metal that's used in everything from catalytic converts to jewelry to dentistry to the production of surgical instruments. There's currently a huge shortage of palladium. In fact, it's the biggest shortage in three decades, so any decent rebound in industrial usage post-Greece could help to boost prices in the coming months.

From a technical standpoint, this stock topped out earlier this year after it formed a double-top chart pattern at around $7.93 a share. Since that topping action, shares have fallen all the way down to its current price of $3.85 a share. Over the past couple of weeks, the stock has been making higher lows, which is bullish price action, and buying support has come in around $3.30 to $3.60 a share. I would look to buy this stock on any weakness and add to the position if you see it take out some near-term resistance at $3.89 and 4.18 a share on a closing basis. If PAL moves above those levels, then I think this has the potential run back toward $6 in very short order.

The current short position on PAL isn't huge, but it's big enough to spark a sizable short-covering rally that squeezes the bears. As of May 31, the short interest as a percentage of the float for PAL is 5.5%. That means that over 7.87 million shares are currently sold short, and the bears have banked huge gains during the recent slide. If I were those bears, I would look to cover down here since it looks like the stock has stopped trending lower.

North American Palladium shows up on a recent list of 8 Mining Stocks With Upside.

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