Two days before its second-quarter earnings report, lululemon athletica inc. (NASDAQ: LULU) was hit this morning with a steep price-target cut. RBC slashed its price target on LULU from $47 to $30, noting "a 200 basis-point increase in our cost of equity assumption." The analysts tempered their bearish note by reiterating an Outperform rating on the shares.

The brokerage firm's downwardly revised target represents a 64% premium to the stock's closing price Monday. By contrast, the average 12-month price target on LULU is $39.72, according to Thomson Financial. This consensus estimate is 117% higher than yesterday's close, which seems to indicate that further price-target cuts could be in the offing, particularly if second-quarter earnings fail to impress.

During the past four quarters, First Call reports that lululemon has met or exceeded analysts' per-share profit expectations every time. However, it's safe to say that nobody on Wall Street was particularly impressed by LULU's last quarterly earnings report. Since the company announced inline earnings of 12 cents per share on June 2, its shares have shed 43% of their value. Even more compelling, institutional investors have reduced their stake in LULU by a net total of 5% since last quarter.

With surging crude oil prices, and a slower economy, airline stocks don't rank high on investor wish lists. You don't hear colleagues standing around the water cooler singing the praises of the airlines. So what would make a sane investor contemplate purchasing an airline stock? I am not sure myself but if you take a long look at JetBlue Airways Corporation (NASDAQ: JBLU), you may feel like throwing the dice.

Mark Kreiger at SeekingAlpha.com has a really good analysis of why JetBlue stock is compelling. He says, " The airlines are responding to the fuel crises by doing all the right things such as utilizing fuel hedging programs, initiating capacity reductions and reducing overall costs."

Kreiger singles out JetBlue because their Q1'08 report soundly beat analyst estimates. The company has $1 billion in cash and has a book value of $6. Well above the approximately $4.50 price per share. More interesting is a potential short squeeze setting up on the stock. Kreiger analyzes this further at the site, and it's worth a close read.

If you believe that at some point crude prices will drop, and you are looking for a way to play that drop, you potentially may want to do some research on JetBlue.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/27/08.

So much for that oil slump. Oil's price pullback lasted all of one day as buyers piled back into oil futures Wednesday, sending oil surging up $5.00 to a new record close of $104.52, after OPEC said it would maintain current production quotas.

The Organization of Petroleum Exporting Countries agreed to maintain production targets at a meeting Tuesday in Vienna, Bloomberg News reported. That price-bullish reality, combined with a surprise report by the U.S. Department of Energy indicating that U.S. crude inventories fell for the first time in eight weeks, was enough to send the oil pits into frenzied buyer mode, once again. Earlier this week oil broke through the previous nominal high of $103.76 set back in 1980.

Gasoline, heating oil prices surge

The other major energy commodities also rocketed higher. Heating oil surged 14 cents to $2.93 per gallon, unleaded gasoline jumped 10 cents to $2.63 per gallon and natural gas climbed 37 cents to $9.72 per million BTUs.

And once again, OPEC repeated its oft-stated rationale that "the markets are well supplied," Bloomberg News reported, arguing that speculators and investors seeking to buy oil as a long-term asset and as an inflation hedge, are primarily behind oil's climb to the stratosphere. And once again, traders and other oil buyers acted as if there won't be enough oil to meet global demand at some point in the months ahead.

In many of my posts I reference the short interest in a given stock -- a factor I consider to be pretty important, especially if it's a trade that I'm looking into.

Basically, the short interest in a stock is exactly what it sounds like -- the amount of "short" positions (bets against a stock) versus the float of a stock. For those who are unfamiliar with shorting, traders borrow shares to sell, that they don't already own, to effectively create a negative bet on the stock's price. Essentially, it's the exact opposite of a long position, but one can't always establish a short position -- sometimes a borrow can't be found.

Moving along on the same opposite of long theme, to end (cover) a short position, the trader must buy the stock, instead of the selling necessary to close a long position.

So why does this matter? Because if a stock has a large short position, there's a good possibility the stock could move higher as a result of shorts closing their positions. That's why I tend to say "if this stock has good news, it will fly" and why I told people interested in betting against Under Armour's (NYSE: UA) long term potential that I thought hedging this quarter is a good idea in case its stock sees a short squeeze.

Remember that no politician in their right mind could try and jump in front of the pro-ethanol train. In doing so, they would risk losing the agricultural lobby, angering his constituents, and even being "less environmentally concerned" than the mighty George W. Bush. As a result of these factors, I'm going to leave the anti-ethanol arguments aside from here on and focus on how to profit from the seemingly imminent increase in the United States ethanol mandate. The pure-play on this is Pacific Ethanol (NASDAQ: PEIX).

Pacific Ethanol has certainly had its fair share of excitement. About a year and half ago, the ethanol frenzy was full-on and the stock quickly moved from $10 per share to $45 per share. However, like many irrational, bubble-like trading patterns, this move was proceeded by a fall back to the $12-20 range, a range the stock has been "stuck" in for the last year.

However, I think that an increase in the ethanol mandate is enough to send the stock out of its range, or at least to the top of its range. Due to the stock's significant short position at about 18% of the float, any piece of good news probably will cause a short squeeze, forcing shorts to cover their positions and run for the hills. When short squeezes occur, speculators tend to also buy the stock, thus forcing even more volatility upon the stock.

It wasn't a huge percentage gainer, but at least it was in the right direction. After five trading days of losses in a row, eBay shares finally gained some lost ground today. They gained 51 cents, or 1.49%, to close at $34.73.

Seems like investors must have agreed with our morning post pointing out that eBay's stock could be a good deal here. Too bad the shares have slipped 19 cents in after-hours trading (as of 6 p.m.). But that could be temporary.

Be sure to check out the comment on the post. That reader agrees with Sarah and notes a lot of short selling is going on. If there is a sudden spike in the share price, we'll have to figure he was right and a short squeeze is underway. Now, that would be fun!