A massive short squeeze in Shake Shack is sending shares soaring

Wall Street loves to hate Shake Shack.

Shares of the burger chain have soared more than 35 percent in the last three months. Despite the rally, it's still one of the most heavily shorted stocks in the market. According to FactSet data, Shake Shack short interest comes in at 48 percent of its float, and that leaves Miller Tabak technician Matt Maley warning against its sizzling hot run.

"The stock did break above double top levels to 2017 highs of $40," Maley said Wednesday on CNBC's "Trading Nation." "A lot of that fuel has been short covering, I think it's going to pull back from here."

In other words, Shake Shack's rally is unsustainable, according to the technical analyst. Additionally, Maley points out that the stock is extremely overbought at current levels. When investors short stocks, they are betting that shares will fall. But when shares rise, those investors are often forced to cover their short bets, and that can send a stock soaring.

After an upgrade from Morgan Stanley, Shake Shack was up more than 6 percent Thursday morning. trading at $44.59.

However, Maley also emphasizes that the stock's break above $40, which happened late November, is overall positive on an intermediate-term basis. "If you do want to, buy it, but I would buy it on weakness rather than chase it up at these levels," he cautioned.

Chad Morganlander, a portfolio manager at Washington Crossing Advisors, is also cautious on Shake Shack, mentioning that there are other names in the fast casual restaurant space that would be more worth a buy.

"The problem with this company though is that same store sales have actually been declining year over year, so that's something of a concern," he said on "Trading Nation." "And it has a higher price point as opposed to McDonald's. The price point for a burger [at Shake Shack] is about $10, where McDonald's is roughly $3."

Shake Shack shares are up 17 percent this year.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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