Five Rallying Stocks That Are Ripe to Fall

01/13/2011 7:01 am EST

Focus: STOCKS

By the Staff at Kapitall.com

Traders believe the recent rallies in each of these stocks are coming to an end. Short sellers seem to think these rallies are about to reverse. But will the inevitable short covering push these stocks even higher?

Each of these stocks is approaching an inflection point, based on moving average trends. For this article, we define an inflection point as the convergence between the 50-day and 200-day moving averages (MAs).

When these two moving averages cross, it often represents a shift in investor sentiment. If the 50-day MA moves above the 200-day MA (bullish), it's called a "Golden Cross" signal. If, on the other hand, the 50-day MA crosses below the 200-day MA (bearish), it's called the "Death Cross."

To compile this list, we started with a universe of stocks that have seen the SMA50 (50-period simple moving average) move above the SMA200 (i.e. a bullish signal). We then narrowed down the list by only focusing on those stocks that have seen a sharp increase in shares shorted over the past three months.

Short trends data sourced from AOL Money. (Note: All short trends described occurred between Sept. 15 and Dec. 15.)

First Niagara Financial Group Inc. (FNFG): Savings and loans industry. Market cap of $2.92 billion. SMA50 at $13.06 versus SMA200 at $12.68 (current price at $14.10). Shares shorted increased from 10.9 million to 21.31 million over the last three months. Short float at 10.27%, which implies a short ratio of 9.93 days. The stock has gained 2.5% over the last year.



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Harsco Corp.(HSC): Steel and iron industry. Market cap of $2.45 billion. SMA50 at $25.96 versus SMA200 at $25.74 (current price at $30.98). Shares shorted increased from 1.11 million to 2.14 million over the last three months. Short float at 2.67%, which implies a short ratio of 2.94 days. The stock has lost 9.1% over the last year.



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NEXT: Three More Potential Short Plays to Watch

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Resolute Energy Corp. (REN): Independent oil and gas industry. Market cap of $860.2 million. SMA50 at $12.50 versus SMA200 at $12.15 (current price at $15.68). Shares shorted increased from 2.69 million to 4.67 million over the last three months. Short float at 8.86%, which implies a short ratio of 20.46 days. The stock has gained 49.19% over the last year.



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Omnicare Inc. (OCR): Drugs wholesale industry. Market cap of $2.9 billion. SMA50 at $24.45 versus SMA200 at $24.40 (current price at $25.38). Shares shorted increased from 6.14 million to 10.26 million over the last three months. Short float at 9.12%, which implies a short ratio of 4.98 days. The stock has lost 4.3% over the last year.



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The New York Times Co. (NYT): Newspaper industry. Market cap of $1.48 billion. SMA50 at $9.11 versus SMA200 at $9.07 (current price at $9.97). Shares shorted increased from 9.21 million to 15.24 million over the last three months. Short float at 11.95%, which implies a short ratio of 5.01 days. The stock has lost 28.14% over the last year.



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By the Staff at Kapitall.com

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