The equity markets have made quite a run off the early-September low. To put things in perspective, over the last few months, the Dow Jones Industrial Average is up nearly 1500 points and the Nasdaq Composite more than 500 points.

Bulls clearly have all of the momentum right now as they continue to squeeze this market higher. At this point, I think we can reasonably speculate that short sellers have grown tired and frustrated with their pursuit to profit from a downturn in the market.

While we still cling to the belief that one of the cardinal tenets of trading is "The trend is your friend," I think we need to step back and objectively evaluate some of Wall Street's high flyers. Most of these stocks are trading at extremely rich, grossly inflated fundamental valuations. However, we have seen time and time again that momentum and emotion can create a positive feedback loop. This ultimately leads to a security becoming progressively more mispriced in the marketplace.

It would be dangerous and foolish to go out and short these names based on the mere fact that they trade at high P/E ratios, or are up 100% or more YTD. The best contrarian investors know that patience and timing are critical in this business, so we will continue to watch these leading stocks for the subtle signs of distribution seen near key reversals. (Data based on 10/29/2010 closing prices)

9) Brigham Exploration Company (BEXP)
Market Cap: $3.08 billion
P/E: 90.83
Forward P/E: 28.63
Dividend Percentage: -
YTD Performance: +94.00%
30-Day Performance: +12.34%
Float Short: 9.70%

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8) Green Mountain Coffee Roasters (GMCR)
Market Cap: $4.92 billion
P/E: 71.71
Forward P/E: 31.60
Dividend Percentage: -
YTD Performance: +37.78%
30-Day Performance: +9.42%
Float Short: 23.18%

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NEXT: More Short Possibilities Revealed

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7) F5 Networks, Inc. (FFIV)
Market Cap: $11.09 billion
P/E: 73.35
Forward P/E: 31.68
Dividend Percentage: -
YTD Performance: +162.26%
30-Day Performance: +15.36%
Float Short: 6.04%

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6) Akamai Technologies, Inc. (AKAM)
Market Cap: $9.86 billion
P/E: 64.40
Forward P/E: 32.99
Dividend Percentage: -
YTD Performance: +107.18%
30-Day Performance: +1.82%
Float Short: 5.09%

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5) Wynn Resorts, Limited (WYNN)
Market Cap: $12.57 billion
P/E: 307.42
Forward P/E: 43.35
Dividend Percentage: 0.99%
YTD Performance: +75.09%
30-Day Performance: -10.99%
Float Short: 8.11%

Click to Enlarge

NEXT: Four More Short Set-Ups to Watch

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4) Netflix, Inc. (NFLX)
Market Cap: $9.84 billion
P/E: 71.03
Forward P/E: 48.64
YTD Performance: +246.80%
30-Day Performance: +12.08%
Float Short: 20.76%

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3) VMware, Inc. (VMW)
Market Cap: $36.37 billion
P/E: 125.37
Forward P/E: 49.03
Dividend Percentage: -
YTD Performance: +107.24%
30-Day Performance: +8.70%
Float Short: 7.57%

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2) Acme Packet, Inc. (APKT)
Market Cap: $3.34 billion
P/E: 92.18
Forward P/E: 51.51
Dividend Percentage: -
YTD Performance: +387.18%
30-Day Performance: +29.57%
Float Short: 5.95%

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1) Rackspace Hosting, Inc. (RAX)
Market Cap: $3.81 billion
P/E: 94.47
Forward P/E: 53.98
Dividend Percentage: -
YTD Performance: +44.12%
30-Day Performance: +11.05%
Float Short: 29.34%

Click to Enlarge