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After GameStop surge, market analysts share which other stocks could see short squeeze rallies

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GameStop shares surge in short squeeze, highly shorted stocks rise

It's game on for GameStop. The stock, though lower on Friday, has surged more than 100% this week.

That rally was sparked by a deal with venture capital firm RC Ventures, which included a board shake-up, though the bulk of the gains have been credited to a short squeeze rally. Investors who are short the stock are forced to cover their positions when it rises, a repeating pattern that then propels the stock even higher.

But GameStop isn't the only highly shorted name on the rise. Bed, Bath & Beyond, American Airlines and StitchFix have also climbed this week – three stocks with above-average short interest as a percentage of their float.

Matt Maley, chief market strategist at Miller Tabak, is betting on more gains for Bed, Bath & Beyond, a stock with short interest at 64% of its float.

"This stock has already broken above, on a technical basis … its trend line going all the way back to 2015. Remember, this is one retailer that got hurt long before the pandemic came along," Maley told CNBC's "Trading Nation" on Thursday.

It has since moved above a high set in October, which should also give it momentum to the upside, Maley said.

Nancy Tengler, chief investment officer at Laffer Tengler Investments, names American Airlines as the pick that could see an upside squeeze.

"The airline play in American Airlines, the reopening travel play, is the way I would go as a trader on this. We have our reopening bet in Southwest Airlines, but I like the potential for American Airlines here," Tengler said during the same segment.

American Airlines has 28% short interest. The shares have risen 6% this week.

Tengler added that there is upside after a year when airlines were hit hard by the Covid pandemic.

"You have to give a concession to the fact that earnings are horrible, can't really get any worse, so we think, at the margin, that could be positive," Tengler said. "We have a relative price-to-sale ratio chart that we look at this on valuation, it looks ugly, but tells us what we already know — this is a cheap stock that I think you get a bounce in, and it's a trade, it's not an investment."