NEW YORK ( Stockpickr) -- After moving steadily higher throughout the first quarter, the markets were roughly flat in April and have been sliding in May. Could they be gearing up for their next upward move? After all, earnings have been quite robust, and corporate profits continue to trend nicely higher.
If we do get further gains, then it could pay to follow a strategy that paid off handsomely in the first quarter: focusing on risky and often heavily shorted stocks. As investors started to focus on riskier stocks, short-sellers got spooked and scrambled to cover their bearish bets. By doing so, they unwittingly added buying pressure to these stocks.
Assuming that scenario plays out again, let's look at the current crop of heavily-shorted stocks, identifying five that may be subject to a major short squeeze.
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