5 Hated Stocks You Should Love

DELAFIELD, Wis. (Stockpickr) -- This stock market is a short-seller's worst nightmare.

I have watched the bears come after stock after stock and continue to get squeezed out of their positions. Those squeezes are happening with little mercy for the shorts. That latest example was heavily-shorted e-commerce player Zulily (ZU), which exploded higher on Thursday by 18% to $72.75 a share after a breakout fourth-quarter earnings report. This stock has absolutely destroyed the shorts since it came public around $40 last November and is now trading in new all-time-high territory.

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Another name that continues to take it to the shorts is Criteo (CRTO), which I flagged in Feb. 14's "5 Hated Stocks That Could Get Squeezed Much Higher" at around $43 per share. I mentioned in that piece that shares of CRTO sported a very high short interest of 14.4% and an extremely low float of just 14 million shares. This stock has done nothing but rip higher since then, with the stock printing a new all-time high on Thursday of $51.15 a share. That's practically a gain of 20% in a week for anyone who bought into this squeeze.

Since this market remains in the control of the bulls, I will continue to run my scans for equities that are loved by the short-sellers. These names could be the next candidates to put a thumping on the bears like we've seen this year with Zulily, Tesla Motors (TSLA) and GT Advanced Technologies (XXX). Believe me, hedge funds are doing the exact same thing because they know that heavily-shorted stocks are a target-rich hunting ground for the next monster movers.

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With that in mind, here's a look at five stocks that could be setting up for monster short squeezes soon.

Achillion Pharmaceuticals

One biotechnology player that could be preparing to put a hurting on the shorts is Achillion Pharmaceuticals (ACHN), which discovers, develops and commercializes anti-infective drug therapies in the U.S. and internationally. This stock is off to a decent start in 2014, with shares up around 11%.

The current short interest as a percentage of the float for Achillion International is extremely high at 29.7%. That means that out of the 56.17 million shares in the tradable float, 16.7 million shares are sold short by the bears. This is a monster short interest on a stock with a relatively low float. If buyers step up to the plate on ACHN soon, then we could easily see a huge short-squeeze.

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If you take a glance at the chart for Achillion Pharmaceuticals, you'll notice that this stock has been uptrending for the last month, with shares moving higher from its low of $2.98 to its recent high of $3.87 a share. During that uptrend, shares of ACHN have been making mostly higher lows and higher highs, which is bullish technical price action. This move is quickly pushing shares of ACHN within range of triggering a big breakout trade that could send the shorts running for cover.

Traders should now look for long-biased trades in ACHN if it manages to break out above some near-term overhead resistance levels at $3.87 to $4 a share with strong volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.11 million shares. If that breakout materializes soon, then ACHN will set up ACHN for a possible squeeze higher back towards its next major overhead resistance level at $4.36 a share. Any high-volume move above that level will then give ACHN a chance to re-fill some of its previous gap-down-day zone from last September that started above $7 a share.

Traders can look to buy ACHN off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $3.35 a share. One can also buy ACHN off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Eagle Bulk Shipping

Another shipping player that could be setting up to inflict some pain on the shorts is Eagle Bulk Shipping (EGLE), which engages in the ocean transportation of various bulk cargoes worldwide. This stock has started to gain some interest from the bulls over the last three months, with shares up 20%.

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The current short interest as a percentage of the float for Eagle Bulk Shipping is extremely high at 30.4%. That means that out of the 15 million shares in the tradable float, 4.86 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.3%, or by around 199,000 shares. Considering the way the chart is shaping up for shares of EGLE, the shorts could be in for a world of hurt soon.

If you take a glance at the chart for Eagle Bulk Shipping, you'll notice that this stock recently formed a major bottoming pattern, with shares finding buying interest at $3.44, $3.65 and $3.54 a share. Following that bottom, shares of EGLE have started to trend back above both its 50-day and 200-day moving averages. That spike back above its 200-day on Thursday was accompanied by strong upside volume, after 1.54 million shares traded versus its three-month average volume of 870,000 shares. That move is starting to push shares of EGLE within range of triggering a potentially explosive squeeze and breakout trade.

Traders should now look for long-biased trades in EGLE if it manages to break out above some near-term overhead resistance levels at $4.75 to $4.93 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 870,684 shares. If that breakout kicks off soon, then EGLE will set up for a possible squeeze back towards its next major overhead resistance levels at $5.50 to $6.42 a share.

Traders can look to buy EGLE off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $3.92 a share. One could also buy EGLE off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Organovo

One health care player that could be getting ready to destroy the shorts is Organovo (ONVO), which develops three-dimensional bioprinting technology for creating functional human tissues on demand for research and medical applications. This stock has been on fire over the last six months, with shares up huge by 77%.

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The current short interest as a percentage of the float for Organovo is extremely high at 21.5%. That means that out of the 62.15 million shares in the tradable float, 13.41 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.9%, or by around 1.42 million shares. Those shorts might be pressing their bets at the worst time, since the chart for ONVO is setting up for a potentially explosive move higher.

If you take a look at the chart for Organovo, you'll notice that this stock has been uptrending over the last month, with shares ramping higher from its low of $8.50 to its high of $10.84 a share. During that uptrend, shares of ONVO have been consistently making higher lows and higher highs, which is bullish technical price action. That uptrend has now pushed shares of ONVO within range of triggering a big breakout trade and potentially a monster short-squeeze.

Traders should now look for long-biased trades in ONVO if it manages to break out above some near-term overhead resistance at $10.84 a share with strong upside volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 3.65 million shares. If that breakout gets underway soon, then ONVO will set up for a squeeze back towards its next major overhead resistance levels at $12.38 to $13.65 a share. Any high-volume move above $13.65 will then give ONVO a chance to tag $15 a share.

Traders can look to buy ONVO off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $9.90 a share or near more near-term support at $9.48 a share. One can also buy ONVO off strength once it starts to bust above that breakout level with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Agios Pharmaceuticals

Another short-squeeze candidate that looks ready to turn the heat up on the bears is Agios Pharmaceuticals (AGIO), a biopharmaceutical company focused on the development and commercialization of therapeutics in the field of cancer metabolism and inborn errors of metabolism in the U.S. This stock has been blazing a path to the upside in 2014, with shares up 39% so far.

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The current short interest as a percentage of the float for Agios Pharmaceuticals is very high at 18%. That means that out of the 11.69 million shares in the tradable float, 2.10 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.9%, or by about 1.99 million shares. Shares of AGIO could be setting up squeeze the shorts into its earnings report, which is scheduled for March 6 before the market open.

If you consult the chart for Agios Pharmaceuticals, you'll notice that this stock has been uptrending over the last month, with shares moving higher from its low of $25 to its recent high of $35.34 a share. During that uptrend, shares of AGIO have been consistently making higher lows and higher highs, which is bullish technical price action. This uptrend is coming after shares of AGIO sold off hard in January from $44.04 to $25 a share. Shares of AGIO are now back on the uptick with the stock quickly approaching a big breakout trade above some near-term overhead resistance.

Traders should now look for long-biased trades in AGIO if it manages to break out above some near-term overhead resistance levels at $35.35 to just above $36 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 255,262 shares. If that breakout triggers soon, then AGIO will set up to squeeze back toward its next major overhead resistance levels at $40 to its 52-week high at $44.04 a share.

Traders can look to buy AGIO off weakness to anticipate that breakout and simply use a stop that sits a comfortable percentage point from your buy point. One can also buy AGIO off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Fusion-io

My final short-squeeze trading play is Fusion-io (FIO), which develops, markets and sells storage memory platforms in the U.S. and internationally. This stock has been on a tear so far in 2014, with shares up sharply by 28%.

The current short interest as a percentage of the float for Fusion-io is pretty high at 14.8%. That means that out of the 98 million shares in the tradable float, 14.72 million shares are sold short by the bears. This is a decent short interest, so traders should track shares of FIO for a potential short-squeeze if this stock can trigger a technical breakout soon.

If you look at the chart for Fusion-io, you'll notice that this stock just formed a major bottoming chart pattern at $10.55, $10.52 and $10.32 a share. Following that bottom, shares of FIO have started to spike higher and move within range of triggering a major breakout trade and a potential squeeze higher. That breakout could be explosive since it would push shares of FIO into a previous gap-down-day zone from last October.

Traders should now look for long-biased trades in FIO if it manages to break out above some near-term overhead resistance at $11.75 a share to its 200-day moving average of $11.97 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 3.12 million shares. If that breakout materializes soon, then FIO will set up to re-fill some of its previous gap-down-day zone from last October that started at $13.50 a share. If that gap gets filled with volume, then FIO could easily tag $14.50 to $15.50 a share.

Traders can look to buy FIO off weakness to anticipate that breakout and simply use a stop that sits right around major support at $10.32 a share. One can also buy FIO off strength once it starts to blast off above those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

To see more stocks that could be setting up for monster short-squeezes, check out the Monster Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.