Short Squeeze ($ETFC)

• Charles Amadeus
• August 30th, 2009

E-Trade Financial is poised to move higher as the online securities broker issues a margin call on the short sellers. Over 20% of the available shares have been borrowed and sold, so this two month high could crush stubborn bears.

Trading in a primary and secondary uptrend on the 20sma, $ETFC has a tentative target of 1.83. Position size and stop are based on the 1.35 level in the event of a false breakout and reversal. No matter what your expectations are, always prepare for a worst case scenario.

Friday’s breakout in $ETFC is reminiscent of this August 20th move in $AIG, which has risen nearly 100% in the last week. There is always a reason to be concerned about the future (like the falling $NYMO mentioned here), but a number of stocks on this screen remain healthy.