My final short-squeeze trading idea is none other than SolarCity (SCTY), which engages in the design, installation, and sale or lease of solar energy systems to residential and commercial customers and government entities in the U.S. This stock is off to a monster start in 2014, with shares up sharply by 33%.
The current short interest as a percentage of the float for SolarCity is extremely high at 28.1%. That means that out of the 37.93 million shares in the tradable float, 9.34 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16%, or by about 1.28 million shares. This is a disgustingly higher short interest on a stock with a relatively low float. This is also another stock that the bears are probably fretting over right now since it's so close to entering new all-time-high territory.
If you look at the chart for SolarCity, you'll notice that this stock has been trending sideways and consolidating over the last month, with shares moving between $65.61 on the downside and $79.86 on the upside. Shares of SCTY have started to spike sharply higher off the lower-end of its recent range and the stock is now quickly approaching a major breakout trade into new all-time-high territory.
Traders should now look for long-biased trades in SCTY if it manages to break out above some near-term overhead resistance levels at $77.50 to its all-time high at $79.86 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 4.30 million shares. If that breakout triggers soon, then SCTY will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $90 to $100 a share.
Traders can look to buy SCTY off any weakness to anticipate that breakout and simply use a stop that sits right below Thursday's low of $69.40 a share or near that recent range low of $65.61 a share. One can also buy SCTY off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.
Keep in mind that SolarCity is set to report earnings on Feb. 24 after the market close. Could this stock be the next GMCR? It very well may by, but at a minimum I think this stock will squeeze very hard ahead of its earnings report. Be ready if we get it.
To see more stocks that could be setting up for monster short-squeezes, check out the Short-Squeeze Stock Candidates portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.