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Squeeze the Joy Out of the Market

A short squeeze is a commonly misunderstood investing phenomenon where a heavily shorted stock rallies very quickly and then retraces. They can be difficult to predict, but they do happen from time to time and can be dramatic. There are common characteristics of short-squeezes that can be useful for forecasting purposes but we have to be careful about how those events are used to create a forecast. (more…)

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Trading the Dead Cat Bounce in MGI

The money transfer business is in a state of flux. New competition and technology changes have proven to be a formidable problem for the traditional players in the business like Western Union (WU) and Money Gram International (MGI). Traditionally these firms had large barriers to entry and were income generating cash-cows. Unfortunately changes in the global economy have turned these advantages into disadvantages as the entrenched companies have been too slow to adapt. (more…)

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AOL’s Short Covering Rally is out of steam – be Bearish

On November 5th, America Online reported revenue that beat the street’s expectations, 561m vs. 531m estimated. That surprise led to an impressive gain in AOL shares as the stock ran from $40 to $47 from 11/5 to 11/15. The earnings report to me though was mixed because the company missed on the earnings per share estimate (reporting .02 cents when a profit of .36 cents was expected). The rally in the shares looks to me to have been mostly related to short covering. For proof of this, you need only pull up AOL’s short interest data. (more…)

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Will Open table (OPEN) lose its lunch to YELP?

Open table competes with Yelp in online restaurant research. Yesterday, YELP reported strong earnings and revenue growth, and the YELP is rallying today on a massive short squeeze. Open table is rallying today off YELP’s halo effect, but since the 2 companies are in competition, YELP’s strength may be at the expense of OPEN’s user base. (more…)

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Bears could get nervous about ITT Education (ESI)

While the current trading environment is not extremely conducive for short squeezes, I think we could get one in ITT education (ESI) when they report earnings on April 25. ESI has historically been a highly shorted stock, which has undergone extreme price fluctuations due to bearish speculation through high short interest. There is not a lot to like in the For profit education industry when you consider that the government has drawn back many of the educational grants for education seekers. The precipitous drop in shares of APOL, ESI, STRA are indications of that. (more…)

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