Here's another reason for traders to dislike the stocks they already hate...
Of six of the most-shorted stocks in the S&P 500, four have surged this quarter, seeing double-digit gains and outperforming the broader stock market rally. The winners are GameStop, Transocean, ADT and Mattel.
When traders go short stocks, they are hoping to profit from a stock's decline by selling borrowed shares. But when such companies see a jump in share price, those shorts work against the investor, and in order to avoid further losses, short sellers are forced to buy those shares back and close out those short positions.
That buying pressure can cause a stock to rally — known in trader parlance as a "short squeeze." And that appears to be happening with several stocks.
"It can actually be a big contrarian indicator," Gina Sanchez of Chantico Global said Friday on CNBC's "Trading Nation." "If any of those companies do particularly well, they're coiled up so they can have a big bounce."