It has been an interesting 12 months for two of the ASX’s most popular stocks in Flight Centre Travel Group Ltd (ASX: FLT) and Blackmores Limited (ASX: BKL).

Flight Centre looked as though it had put the worst of its troubles behind it until it announced a profit downgrade in May.

Source: Google Finance

Source: Google Finance

As the chart above highlights, the travel agent’s shares were trending nicely higher prior to the announcement but subsequently crashed with investors once again questioning the company’s business model and its ability to compete in an increasingly digital market.

While I still remain cautious on the outlook for Flight Centre, mainly because competitor Webjet Limited  (ASX: WEB) continues to post very strong growth, there are a number of signs that suggest now may be a good time to consider investing in the shares.

Firstly, the share price appears to have stabilised and looks as though it enjoys strong support at the $30 level. This is an attractive price for value investors because the shares trade on a price-to-earnings ratio of around 12 and investors can be confident they will receive a fully franked dividend yield of around 5%.

The second sign that the worst could be over for Flight Centre shares is the movement in short positions.

Shares: www.shortman.com.au

Shares: www.shortman.com.au

Short positions have been trending down over the past few months and have fallen by more than 3% over the past week. Although the overall number of short positions is still high compared to the majority of other companies on the ASX, the recent decline in short positions could suggest that many short sellers believe there is limited downside from here.

One of the big superstar stocks in 2015 was vitamin maker, Blackmores, but as the chart below highlights, it has struggled since the start of 2016 under the weight of high expectations and regulatory uncertainty out of China.

Source: Google Finance

Source: Google Finance

The shares have fallen by around 37% since the start of the year, but Blackmores shares now appear to have stabilised and seem to enjoy a healthy level of support at around the $130-$135 level.

Like Flight Centre, one of the factors that could renew investor support is the sharp fall in short positions over the past month.

Source: www.shortman.com.au

Source: www.shortman.com.au

As the chart above shows, short positions now only account for around 2% of shares on issue and this is well below the levels recorded earlier in the year.

Once again, this could be a sign that short sellers believe most of the downside has already been priced in and that the shares appear undervalued at current levels.

While it is likely that investors will remain cautious until Blackmores releases its full year results in August, I wouldn’t be surprised if the company releases another strong result and I would be happy to accumulate shares at current levels, considering the risk-reward proposition on offer.

If you think it is still too early to buy shares of Blackmores or Flight Centre, why not consider these three blue chip shares instead?

Why These 3 Blue Chip Shares Are Set to Soar in 2016

Discover The Motley Fool's Top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Christopher Georges owns shares of Blackmores Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.