A Small-Cap Energy Stock Fueling Up for a Short Squeeze

DELAFIELD, Wis. (Stockpickr) -- Energy -- and specifically the oil and gas complex -- continues to be a bright spot in this market.

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Just take a look at some of the moves in this sector, such as small-cap independent oil and gas player Quicksilver Resources (KWK). That stock is ripping higher today by 7% on above-average volume. Over the last six months, shares of KWK have soared higher by 58%, and the stock is now approaching its 52-week high at $3.67 a share.

Another small-cap oil and gas player that's been on a fire of late is Callon Petroleum (CPE), which is up by more than 40% so far in 2014. This stock is also trending strong today, with shares up by 2.6% at $9.17, within range of its 52-week high of $9.84 a share. One more small-cap oil and gas play that's recently exploded to the upside is Magellan Petroleum (MPET), which has soared higher in 2014 by over 100%.

As you can see, the oil and gas complex is trending strong right now, and small-cap stocks in this space are in play with the bulls. This momentum could be here for a while when you consider the troubling escalations we've seen in the past few weeks in Ukraine. The geopolitical tensions in Ukraine are keeping a bid under the energy market, and unless that situation de-escalates dramatically, then I expect that bid to remain in place.

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This all has me scanning the small-cap energy space for what could be the next big runners. A number of small-cap oil and gas players could very easily be next to make a major run as the momentum players move from stock to stock in the sector looking for opportunity. These small-cap energy names have the capability to make massive moves higher, since many have low floats and lots of shorts.

A perfect example of an oil and gas player that's recently exploded higher and also has a low float and lots of shorts is FX Energy (FXEN), which has ripped to the upside by 30% over the last three months. FX Energy has a tradable float of 50 million shares, and the short interest as a percentage of its float is just over 6%. Just this month, shares of FXEN exploded higher from its low of $3.13 to its recent high of $5.14 a share. Make no mistake, once the big upside volume flowed into FXEN a few weeks ago. the shorts got spooked and covered in a hurry, producing that large spike.

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