As some of the most hated stocks surge, traders say only one looks like a buy

Some of the most heavily shorted stocks in the market are getting trader love. Stocks such as AMD, Shake Shack and Under Armour are all up double digits so far this year.

There’s one shorted stock in particular that market watchers are crushing on: Match Group.

“Match is kind of interesting,” Frank Cappelleri, chief market technician at Instinet, told CNBC’s “Trading Nation” on Thursday. “It had great numbers recently, and any time you see a reaction like that with a huge gap and that gap holds that shows you a lot. It’s very telling, very positive.”

The online-dating company soared more than 17 percent on Wednesday following earnings for its best day since its 2015 public debut. It added another 8 percent on Thursday and looks to hold those gains through to the end of Friday’s session.

“Before the stock reported it had some issues in 2018, but it was able to hold that uptrend line, and I think that showed that investors were giving it the benefit of the doubt before earnings came,” said Cappelleri. “The next step from this point is to have that breakout which I think could encourage a lot of momentum money then to flow into the stock going forward.”

Match’s march higher earlier in the year was interrupted in May after Facebook announced its foray into online-dating products. Its shares consolidated through the summer until Wednesday’s surge.

Mark Tepper, president of Strategic Wealth Partners, says Facebook as a competitor is little threat to Match.

“Match is just in a great market with awesome growth potential, and they’re really the pioneers of online dating so they’ve got a huge advantage in the marketplace,” Tepper said on “Trading Nation” on Tuesday. “Tinder is probably the key catalyst for Match. It’s the world’s No. 1 downloaded and top-earning dating app.”

Tinder subscribers raced 81 percent higher in its second quarter to top 3.8 million worldwide. Direct revenue increased 136 percent year over year.

“Growth like that at a forward [price-to-earnings ratio] of only 33, I think it’s well worth a buy at this level,” said Tepper.

Match Group is one of the most heavily shorted stocks on Wall Street with short interest at nearly 50 percent of its float. Short interest, meaning the number of shares which have been sold short, is a useful gauge for investor sentiment and often indicates expectations a stock will move lower.

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