After outperforming and hitting new highs, three MarketSmith 250 stocks have become targets for short sellers. They have some of the highest short interest in the list.
Short sellers bet on stocks to decline to make profit. A stock's short interest percentage tells how much of a stock's float is owned by short sellers.
But high levels of short interest can also work in the bulls' favor. That's because if a stock starts to rally, short sellers are forced to buy shares to cover their positions. That can create a fast advance for a stock.
Used car retailer stock Carvana is nearly 33% owned by short sellers. The stock gained a spectacular 720% this year, even after its most recent sell-off, which started in mid-September.
Shares gapped up and hit a 52-week high on July 19. The gain is proving hard to sustain without solid fundamentals to back it up.
Carvana has a history of losses and declining quarterly sales. Although the quarterly losses are diminishing, analysts still project losses this year and next.
The stock got a short-term lift after the company raised its third-quarter adjusted EBITDA on Aug. 9. It introduced same-day deliveries in North Carolina in late August, which boosted shares once again.
The rally was short-lived, however, as the stock started a mid-September sell-off. The stock undercut its 50-day moving average and flashed a sell signal. Shares also triggered the 7% sell rule from the 52.62 buy point of a cup-with-handle base. So, short sellers are proving to be right so far.
Short Sellers See Beverage Stock Losing Its Fizz
Celsius Holdings is another short-seller favorite, with short interest of over 32% of the stock's float. It would take nearly nine days of trading to absorb that much short selling.
Celsius stock gapped up over 20% after the company reported higher-than-expected second-quarter profit and sales on Aug. 8. The fitness beverage company has been trending lower since it hit an all-time high on Sept. 8.
Shares fell over 15% the week of Sept. 22, and plunged below their 10-week moving average.
Short sellers hold over 20% of Sprouts Farmers Market shares outstanding. They're betting on the natural and organic foods grocery chain to break its uptrend.
Shares are in a buy zone from a flat base buy point at 40.39. The stock hit a 52-week high on Friday. So far, bears haven't been proved correct about Sprouts.
Sprouts reported only mid-single-digit sales growth for the last six quarters. Sales declined in the two quarters before that. Full-year EPS is forecast to increase 15% then an unimpressive 1% in 2024, according to IBD MarketSmith.
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