Stock Quotes in this Article: NEON, TWGP, UBNT, SCTY, VEEV

DELAFIELD, Wis. (Stockpickr) -- Nothing is better than waking up to a fresh short squeeze in the morning on Wall Street if you're long the stock getting squeezed. The taste of victory for the bulls is something to savor when you know there are a ton of bears caught on the wrong side of the trade getting squeezed. The profits add up quick.

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Just take a look at the short squeeze we saw in Green Mountain Coffee Roasters (GMCR) last week after the company report earnings and a new partnership and investment from Coca-Cola (KO). Shares of GMCR skyrocketed higher as the shorts were squeezed from under $85 a share post-earnings to its new 52-week high on Thursday of $122.38 a share. That's a monster squeeze that certainly was painful for anyone who was caught betting against shares of GMCR.

Since the prevailing trend right now in the stock market is up, I think it's as great a time as any to scan the market for stocks that are heavily-shorted. These are the names that could be setting up for the next GMCR-type short squeeze. All we need is for a few hedge funds and large traders to decide that it's open season on squeezing the bears and off to the races these stocks could go. Trends like this can develop very quickly in strong uptrending markets, since the bulls know it can be much easier to force the shorts to capitulate.

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With that in mind, here's a look at five stocks that could be setting to squeeze the shorts.

Veeva Systems


One stock player that could be setting up for a large short-squeeze is Veeva Systems (VEEV), which provides industry-specific cloud-based software solutions for the life sciences industry in North America, Europe and the Asia Pacific. This stock has been under selling pressure from the bears over the last three months, with shares down by 15.7%.

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The current short interest as a percentage of the float for Veeva Systems is extremely high at 46.6%. That means that out of the 15 million shares in the tradable float, 5.83 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 19.9%, or by about 1.16 million shares. This is a monster short interest on a stock with a very low float and this is stock that's starting to look very attractive from a technical standpoint.

If you take a look at the chart for Veeva Systems, you'll notice that this stock recently formed a double bottom chart pattern at $28.71 to $28.81 a share. Following that bottom, shares of VEEV have started to uptrend and the stock is now starting to break out above a key downtrend line. That breakout is quickly pushing shares of VEEV within range of triggering an even bigger breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in VEEV if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $33.41 to $33.76 and then once it clears more resistance at $35.59 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 813,403 shares. If that breakout hits soon, then VEEV could easily get squeezed back towards its next major overhead resistance levels at $40 to $43 a share.

Traders can look to buy VEEV off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $30 or around those double bottom support zones at $28.81 to $28.71 a share. One can also buy VEEV 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.

Ubiquiti Networks


A wireless communications player that could be ready to deliver the shorts some major pain soon is Ubiquiti Networks (UBNT), which offers a portfolio of networking products and solutions for service providers and enterprises. This stock has been on fire over the last six months, with shares up big by 58%.

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The current short interest as a percentage of the float for Ubiquiti Networks is extremely high at 27.2%. That means that out of the 29.69 million shares in the tradable float, 5.26 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16%, or by about 853,000 shares. This is another equity that sports a monster short interest and a very low float. What's even worse for the bears here is that shares of UBNT are very close to entering blue-sky territory, or new all-time-high territory.

If you take a look at the chart for Ubiquiti Networks, you'll notice that this stock has been uptrending strong for the last few weeks, with shares moving higher from its low of $37.50 to its intraday high of $46.51 a share. During that uptrend, shares of UBNT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of UBNT back above its 50-day moving average and into breakout territory above some near-term overhead resistance at $45.31 a share. Shares of UBNT are now quickly approaching an even bigger breakout trade that could push the stock into new all-time-high territory.

Traders should now look for long-biased trades in UBNT if it manages to break out above its all-time high of $48 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.05 million shares. If that breakout triggers soon, then UBNT will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $70 a share.

Traders can look to buy UBNT off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $42.54 a share or around more support at $42 a share. One could also buy UBNT off strength once it starts to clear its all-time high of $48 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Tower Group International


One insurance player that could be preparing for a large short-squeeze soon is Tower Group International (TWGP), which underwrites insurance and reinsurance products in Bermuda, the U.S., and London markets. This stock has been annihilated by the bears over the last six months, with shares down by a remarkable 83%.

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The current short interest as a percentage of the float for Tower Group International is extremely high at 23.2%. That means that out of the 53.18 million shares in the tradable float, 2.9 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.6%, or by about 1.41 million shares. Are the short-sellers pressing their luck here with shares of TWGP? I believe they are and this stock is preparing to squeeze them hard.

If you take a look at the chart for Tower Group International, you'll notice that this stock has recently formed a major bottoming chart pattern at $2.41, $2.44, $2.40 and $2.50 a share. Following that bottom, shares of TWGP have started to spike higher off those key support levels and the stock is now quickly moving within range of triggering a major breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in TWGP if it manages to break out above some near-term overhead resistance levels at $2.85 to its 50-day moving average of $2.97 and then more resistance at $3 a share. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.67 million shares. If that breakout triggers soon, then TWGP could easily squeeze back towards its next major overhead resistance levels at $3.40 to $4.10 a share, or even $5 a share. There's also a monster gap-down-down zone that sits right above $5 a share that the shorts will want nothing to do with.

Traders can look to buy TWGP off any weakness to anticipate that breakout and simply use a stop that sits right below those key near-term support levels at $2.50 or at $2.40 a share. One can also buy TWGP 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.

Neonode


Another short-squeeze candidate for your bear-bashing radar is Neonode (NEON), which develops and licenses optical MultiSensing touch and user interface solutions based on its zForce touch technology. This stock has been in play with the bulls over the last three months, with shares up sharply by 24%.

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The current short interest as a percentage of the float for Neonode is very high at 26.7%. That means that out of the 30.97 million shares in the tradable float, 8.86 million shares are sold short by the bears. This is a massive short interest on a stock with a relatively low float. This stock could easily explode higher with a short interest this high if the bulls decide to move into this name with large volume buying.

If you look at the chart for Neonode, you'll notice that this stock has been uptrending over the last few weeks, with shares moving higher from its low of $5.50 to its intraday high of $6.80 a share. During that uptrend, shares of NEON have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NEON within range of triggering a major breakout trade.

Traders should now look for long-biased trades in NEON if it manages to break out above some near-term overhead resistance levels at $7.08 to $7.14 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 482,862 shares. If that breakout hits soon, then NEON will set up to re-test or possibly take out its next major overhead resistance levels at $7.94 to its 52-week high at $8.84 a share. Any high-volume move above those levels will then give NEON a chance to tag or trend north of $10 a share.

Traders can look to buy NEON off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $6.04 a share. One can also buy NEON 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.

SolarCity


My final short-squeeze trading idea is none other than SolarCity (SCTY), which engages in the design, installation, and sale or lease of solar energy systems to residential and commercial customers and government entities in the U.S. This stock is off to a monster start in 2014, with shares up sharply by 33%.

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The current short interest as a percentage of the float for SolarCity is extremely high at 28.1%. That means that out of the 37.93 million shares in the tradable float, 9.34 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 16%, or by about 1.28 million shares. This is a disgustingly higher short interest on a stock with a relatively low float. This is also another stock that the bears are probably fretting over right now since it's so close to entering new all-time-high territory.

If you look at the chart for SolarCity, you'll notice that this stock has been trending sideways and consolidating over the last month, with shares moving between $65.61 on the downside and $79.86 on the upside. Shares of SCTY have started to spike sharply higher off the lower-end of its recent range and the stock is now quickly approaching a major breakout trade into new all-time-high territory.

Traders should now look for long-biased trades in SCTY if it manages to break out above some near-term overhead resistance levels at $77.50 to its all-time high at $79.86 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 4.30 million shares. If that breakout triggers soon, then SCTY will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $90 to $100 a share.

Traders can look to buy SCTY off any weakness to anticipate that breakout and simply use a stop that sits right below Thursday's low of $69.40 a share or near that recent range low of $65.61 a share. One can also buy SCTY off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

Keep in mind that SolarCity is set to report earnings on Feb. 24 after the market close. Could this stock be the next GMCR? It very well may by, but at a minimum I think this stock will squeeze very hard ahead of its earnings report. Be ready if we get it.

To see more stocks that could be setting up for monster short-squeezes, check out the Short-Squeeze Stock Candidates 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.