Shorts hooked on High Liner Foods

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High Liner Foods is the most shorted stock on the TSX based on IIROC and INK data. Shorts added to their positions as the stock rallied 11.8% since March 15th. However, their bets may still pay off. Based on INK signals, the stock appears at risk of a bearish set up based on a combination of relatively large short-selling and average insider commitment.

Top 10 Canadian Stocks Shorted as of March 30, 2019*
    Stock Shares Short % Float Change Insiders
1 HLF High Liner Foods 3,531,037 16.02% 1.02% Mixed
2 CJT Cargojet 1,337,535 11.43% 0.69% Mixed
3 POU Paramount Resources 7,361,638 10.35% 0.01% Mostly Sunny
4 SSL Sandstorm Gold 17,661,624 10.19% -0.01% Cloudy
5 L Loblaw Companies 11,381,647 10.18% -0.69% Mixed
6 GWO Great-West Lifeco 27,483,672 9.89% 0.13% Sunny
7 ACQ AutoCanada 2,684,941 9.82% 0.57% Mixed
8 NPI Northland Power 11,273,912 9.36% 5.57% Mixed
9 CHW Chesswood Group 795,239 8.91% -0.17% Mostly Sunny
10 EXF EXFO Inc. 1,666,183 8.75% 0.80% Sunny

*Stocks trading over $1

In contrast, the second most shorted stock, Cargojet, based on INK short signals, has a potential short-squeeze setup as short-sellers are betting against a stock with relatively high insider commitment as of report date. While insider commitment shows up as mixed on our outlook rankings in the table above, the commitment level was above average at month-end and remains that way, which is enough to call into question the short-selling case.

The third most shorted stock, Paramount Resources, also has a potential short-squeeze setup based on our signals, suggesting the stock may be poised to break out of its current trading range to the upside.

Will short covering help Paramount Resources breakout?

With the stock up over 4% today and trying to overcome its 50-day moving average, it may be attempting that now.

Meanwhile, shorts may be overstaying their welcome at Great-West Lifeco which is trading near its 52-week highs. Too much pessimism over low rates may still be priced into the stock. Based on our signals, a further short-squeeze is possible.

Interestingly, we do not have a short signal for the 10th most shorted stock, EXFO as the insider commitment ranking is not high enough to suggest a short-squeeze is possible. On the other hand, we also do not have an insider commitment plus short positioning bearish combination either.

INK Edge outlook ranking categories (Sunny, Mostly Sunny, Mixed, Cloudy, Rainy) are designed to identify groups of stocks that have the potential to out- or under-perform the market. However, any individual stock could surprise on the up or downside. As such, outlook categories are not meant to be stock-specific recommendations. For background on our INK Edge outlook, please visit our FAQ #5 at INKResearch.com.

 

This post first appeared on INKResearch.com.

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