Right now, the market is heading towards its last push of bullish seasonality, as earnings season and the risk-on trade combine to drive prices higher.
While many investors see this as the point to “sell in May and go away,” I’m seeing things a little differently this year…
This week, the Centers for Disease Control and Prevention (CDC) will allow vaccinated people to have small outdoor gatherings – without wearing masks.
Another sure sign that May won’t be the end of the market’s revival.
Instead, the official economic reopening is right around the corner.
I believe that 2021 could be the genesis of another “roaring 20’s” era, and there are a handful of stocks that I’m adding to my portfolio to profit from our transition back to normal.
There has never been another moment in history where the entire world economy was halted to a standstill by a virus, and mark my words – the reopening will be one of the biggest economic events in history, unlike anything we’ve ever seen.
Which is why I’m always on the lookout for stocks that the short sellers – who are betting that the stock will drop – have extended themselves on.
If their bet is wrong, it gives us a prime opportunity to position ourselves to profit from the short squeeze.
What does a “short squeeze” look like?
Take a look at Harley-Davidson, Inc. (NYSE:HOG) shares over the last week:
This stock was near the top of my short squeeze list as shares had seen an increase in short selling, crossing into an intermediate-term bullish pattern ahead of earnings.
But then, HOG beat expected earnings estimates, and technical buyers started stockpiling HOG as short sellers scrambled to cover their position.
This resulted in a 20% rally in just five days – that’s the power of a real short squeeze.
But you know who has the power to shoot stocks even higher? Amateur traders with a ton of money – and this new brute-force algorithm can help you claim your share.
And right now, my technical charts are pointing to three other stocks that are positioned for the biggest short squeeze profits…
CJ’s May Squeeze Stock #1:
Bloomin’ Brands, Inc. (NASDAQ:BLMN)
Personally, I’m not a huge fan of BLMN, I can’t even tell you the last time that I went to one of their franchises, but it’s all about the experience of “getting out” when it comes to the casual dining restaurants like Outback Steakhouse. Outback is just one of the many restaurants that BLMN operates in this market… a market that is going to get increasingly busy through 2021.
BLMN shares were among the early trades that I recommended to my Night Trader subscribers for some nice gains, and a pending short squeeze is positioning the stock for a repeat as I’m targeting a move to $36 as the stock breaks to new highs.
The 20- and 50-day moving averages are turning bullish again as BLMN stock starts putting pressure on the $30 price level. Its price has seen resistance for the shares over the last quarter, but momentum is building again as the reopening trade gains another head of steam.
Short sellers have been increasing positions, which is like putting gas in the tank before a road trip to higher prices. A break above $30 will act as the catalyst for two things… another round of upgrades from the analyst community and the beginning of a short covering rally.
The combination of reopening with the price activity puts a $35-$36 target on shares of BLMN as we head into the summer.
CJ’s May Squeeze Stock #2:
Molson Coors Beverage Company (NYSE:TAP)
It’s all about the beer at TAP, but I’m not giving away any secrets when I say that. I can point you in the direction of a catalyst that a lot of investors aren’t thinking about, kegs.
We’ve seen spirit manufacturer thrive in the pandemic market for a couple of reasons. First, people like to unwind more than ever with a cocktail. Second, a bottle of something – whatever your favorite spirit may be – is easy to obtain. Beer may be a little different.
Brewers make their margins on volume. Bottles, not kegs. The various shutdowns around the world have caused a slowdown in those volume sales, but the sun is starting to rise on the brewers as the reopening trade continues.
Shares of TAP are finally breaking into a bull market trend. That’s right, the stock has been near the bottom of its one-year range for the last few months. Now, the company is looking to start “rolling out the barrel” as restaurants and bars begin to see more patrons coming through their doors. The fundamental shift will be a revenue windfall for brewers like TAP.
The same windfall will create havoc for the short sellers that have been betting against a recovery in the beer market. I’ve been watching the short interest on TAP shares rise as bearish bets increased. Currently, the short interest ratio for TAP sits at 7.4, which is above the 6.0 threshold that I watch to indicate a brewing short covering rally.
The secret to watch for is when TAP shares hit their “trigger price.” That’s the price my system assigns to a stock to tell me when we’re likely to see the short sellers start scrambling to buy a stock back to cover their losing positions. For TAP, that price is $56.
TAP will announce their earnings on Thursday, before the market opens.
A slight beat, or upward guidance, will send TAP shares into a rally that will put $60 in the rearview mirror on its way to my price target of $70.
CJ’s May Squeeze Stock #3:
Sabre Corporation (NASDAQ:SABR)
Finally, SABR. If you don’t know the company, they are a force in the travel industry. SABR was designed by the airline industry to solve the logistics questions surrounding seat availability and pricing to give the airline a reliable pricing model.
SABR is all about volume in the industry. The more ticket volume the better, and we’re ready to see a sustainable increase in travel volume as the vaccination movement continues to grow the travel industry.
I just sent a new recommendation to my Night Trader readers on this stock. To learn how you can get the details to my premier service, give our VIP sales team a call at 1-877-211-3024.
Looking at the stock, it has been a relative strength performer among the travel stocks, but there’s one fundamental value about SABR that I really like – overhead.
While so many travel companies like airlines and cruise lines are piling on debt to maintain their fleets and operations through the pandemic, SABR is a travel technology company, which means that they don’t have the same enormous and growing overhead. This means that a dollar brought in as revenue finds its way to the earnings line much more efficiently.
Not to mention, JetBlue Airways Corporation (NASDAQ:JBLU) just announced the adoption of SABR‘s technology with their systems to optimize ticket pricing, another fundamental plus for the company.
Technically, shares are in a bullish trend that is preparing to improve. The 20- and 50-day moving averages are both in a bullish patter and providing immediate support for SABR shares.
In addition, volatility on the stock has gone quiet. What I mean by that is that the stock price has been squeezed into a tight range, much tighter than normal. Even the smallest of bullish catalysts will cause SABR shares to spike higher as they continue their bullish trend.
That’s where the shorts come in. Short interest on SABR has been growing, which means the stock faces a potential short squeeze rally.
Earnings are slated for May 4 before the market open. SABR shares have a short squeeze trigger price of $17.00, a price that share hit in March. A press higher from this travel tech company will light the fuse on that short covering rally with a target price of $20.
There are plenty of other profit opportunities that we have to look forward to in May.
So please tune in to my next Straight-Up Profits article!
Until next time,