"Doesn't common sense also dictate that if there are no shares to short, that there is a distinct possibility that the "forces" are planning on an upward path? Hedgies work both ways and could care less about company "short-term" fundamentals, its all about profit. That's common sense too."
For a while, when KKD was trading around $60 (unadjusted, about 3 years ago), the stock was going up and it was very difficult to find shares to short. I don't remember precisely, but I am quite confident the percentage of shares short was above 30% (higher than now).
Consider also that there have been many other stocks with a higher percentage of shares short that weren't saved by the huge short interest. Some names that come to mind include PALM, RETK, and the defunct ETOYS. Conclusion: KKD's short interest percentage is lower than what it has been in the past, and probably not an indicator that the stock "can go up" in a short squeeze. Remember, there is a reason why the short interest has gone up, and it is clear it has nothing to do with an impression that "things will get better soon". Also, consider that a short squeeze typically occurs after there has been a big run-up, and/or there are significant postivie news for the stock. Short of MSFT or GE announcing they will buy KKD, I don't think this will be a likely scenario for a while.