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Market rebound: Here are the names that may get short squeezed

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Short interest is back on the rise and this may be a bullish sign for some stocks.

According to data released by NYSE Group earlier this week, short interest in NYSE-related stocks increased to a record 14.80 billion shares in the second half of July, surpassing the previous high of 14.76 billion shares shorted in the second half of August 2011.

While the short interest ratio measures the total number of shares of a security that has been sold short, how can investors find out if excessive shorting in a given stock will result in reversal?

According to Markit, a proprietary metric called utilization captures the ratio of securities in lending programs that are currently out on loan, expressed in percentage terms.

"A utilization above 70 is an indication that the majority of the supply of shares for short sellers has been exhausted. We have found that when utilization gets to these levels borrow costs typically increase, which makes staying with short positions more expensive," said analyst Andrew Laird of Markit.

"A stock with high utilization can be especially vulnerable to a short squeeze on the back of positive information, as high utilization is an indication of a crowding."

And it is this transaction level data that Markit claims provides an advantage in estimating short squeeze expectations much better when compared with traditional short interest data provided by exchanges on a bimonthly basis.

Here are some stocks in the Russell 2000 that have a high short utilization ratio:

High Short Utilization Ratio

Sym
Description
Price
Utilisation (%)
Short Interest %
% Off 52 Wk Highs
NLNK Newlink Genetics 23.44 86.87 14.34 -48.77
AFSI Amtrust Financial 44.59 83.7 14.45 -4.1
EOX Emerald Oil 7.89 82.82 24.6 -13.26
INVN Invensense Inc 25.12 81.72 31.17 -6.72
GTAT GT Advanced 16.59 79.85 42.09 -19.13
RPTP Raptor Pharma. 10.94 79.74 18.7 -37.98
VHC Virnetx Holding 15.29 77.1 17.61 -40.75
EXEL Exelixis Inc 4.24 76.33 26.47 -49.48
DDD 3D Systems 49.56 76.25 19.32 -49
KERX Keryx Bio. 16.76 76.19 20.9 -5.44
OREX Orexigen Thera. 5.63 76.15 18.42 -26.09
THRX Theravance 22.63 75.99 16.24 -34.35
GLUU Glu Mobile Inc 5.6 73.94 20.88 -21.29
LNN Lindsay Corp 77.07 71.63 24.32 -16.92
AREX Approach Res. 17.53 71.15 29.76 -43.89
CLNE Clean Energy 9.51 71.07 14.81 -31.32
RGR Sturm Ruger 50.71 70.95 23.74 -40.77
WAC Walter Investment 25 70.94 15.01 -39.12
GDP Goodrich Petro. 18.6 70.78 16.74 -41.84
IRBT Irobot Corp 34.63 70.5 22.69 -28.58

—BY CNBC's Pradip Sigdyal