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TheStreet Open House

5 Hated Stocks That Could Blast Off

BALTIMORE ( Stockpickr) -- When it comes to catalysts for stocks to move, there's nothing quite like earnings season. Good earnings can send shares rallying double-digits. At the same time, a bad turnout in earnings data can shove shares down by a similar amount. It's that extra earnings-surprise-induced volatility that makes now such a perfect time for a short squeeze.

We're still in the early stages of earnings season (the "official" kickoff was last week), but the indications are good so far. Of the roughly 10% of the S&P 500 Index that's already reported, around 70% have posted positive earnings surprises. That suggests that Wall Street is underestimating average corporate earnings this quarter.

This week, we're looking to take advantage of mispricing in heavily shorted stocks ahead of their earnings releases. After all, the added buying pressure of good earnings adds significant spark to any potential short squeeze name.

>>5 Tech Stocks Poised for Big Earnings Moves

Let me back up a bit. Put simply, a short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing share price to skyrocket. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which estimates 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.

Naturally, these plays aren't without their blemishes -- there's a reason that these stocks are being heavily shorted. But for investors looking for exposure to a speculative play with a beefier risk/reward tradeoff, these could be powerful upside plays for the coming year.

With that, here's a look at five earnings season stocks that look like prime short-squeeze candidates right now.

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