A Short Covering Secret Contrarians Should Know

Subscribers to Chart of the Week received this commentary on Sunday, January, 11.

We’ve spent a lot of oxygen lately on how great 2025 was for stocks. That’s not very contrarian of us. Luckily, Senior Quantitative Analyst Rocky White has provided contrarians with the perfect table to start out 2026 with.

Rocky had a theory that stocks down big in a year and highly shorted would have a good chance of a short-term rally after the New Year, because short sellers with a significant profit will wait until just after the new year to cover their shorts to delay taxes.

This was a very good indicator this year.

The table below looks at stocks with 10% or more short interest/float and down at least 10% in 2025. Then it looks at the stock returns over the first five trading days of 2026.

The S&P 500 Index (SPX) was up 1.11% for the first five days of the year which was the close yesterday. This list of 60 stocks (down 10% in 2025 and ended the year with at least 10% SI/float) were up an average of 6.94% for the first five days, with 83% positive.

The highlighted stocks boast double-digit returns for 2026 already. A majority of these names still have a while to go before short sellers are truly underwater. This tax harvesting won’t supply tailwinds forever, and the looming volatility of earnings season will muddy the water. But this table can be a great jumping off point for contrarians to filter technical support through.

Case in point: Quantum Computing Inc (NASDAQ:QUBT) has round-number support at $10. ON Semiconductor Corp (NASDAQ:ON) is forming a bullish flag pattern on the charts. Even when early-year short covering is over, these areas could hold.

Conversely, Upstart Holdings Inc (NASDAQ:UPST) is testing its 100-day moving average, and CAVA Group Inc (NYSE:CAVA) is ending the week turned away at its 200-day trendline. If another week goes by and these tests/retests fail, then early season obstacles are already identified.

Considering how difficult it is to ascertain real and fake trends to start a new year, this table can help cut through the noise.

NFL Playoff Teams and Their Corresponding Stocks

It’s NFL playoff weekend, and I thought it’d be fun to break down the playoff teams and what stock (s) they remind me of. (No, I will not be doing this for March Madness.)

New England Patriots

A return to form through a young, ascending QB and a strong coach. Maybe an easy schedule, but you can only win what’s in front of you. Stock: Intel (INTC )Had its glory days, slogged through some subsequent Dark Ages, and now back on top. Up 106% year-over-year and fresh off an endorsement/investment from President Trump.

Click Here to view the rest on Schaeffer’s Substack!