WINDERMERE, Fla. ( Stockpickr) -- With earnings season in full swing on Wall Street, it's the perfect opportunity for market-players to create a powerful watch list of stocks that are due to report numbers that are also heavily shorted by the bears.
Short-sellers hate being caught short a stock that produces earnings that please the bulls. When this happens, we often see tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a big short-covering rally is sparked by a bullish earnings report.
This is why I search the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short timeframe that your profits add up quickly.
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