High short interest: how to read it and what to expect ?

N

novicetrader69

What do high or low short interest values tell us of a stock? Do high values say that a lot of people is expecting price to decrease and vice versa low values that traders are betting on price to grow?

Also, what is to be expected if a stock with a high short interest is due to trend up at market opening? If trend starts, will short covering jump in contributing further to the trend?

Taking for example the uptrend of AMD, is the still high short interest a good reason to think that the uptrend will continue to be fueled by short covering?

Thanks,
nt
 
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zdreg said:
it is a useless short term indicator of direction. that is my experience.
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Have you tried de-lagging the indicator? Short interest is reported bi-monthly in arrears; so the Sept "A" files, which come out in a week and a half, will reference short interest up to Aug 31st. The data in those files are useful for "predicting" (backcasting) price movements during the first week in Sept. To use this information in a timely manner, you have to be able to estimate the values in the Sept A file on Sept 1st, well before it is released. This sounds harder than it is. Short interest is much easier to forecast than price innovations themselves.
 
As an intraday short seller, and one that fades strong upward moves, I studied short interest extensively.

I found no relationship between short interest and expected price moves from where I enter a position, or subsequent profit target. That doesn't suggest short interest isn't a factor in price action, albeit it turned out (to my surprise) to not be material for my current indicators.
 
I don't see it as providing any stand alone value. I use it as a backdrop that inform my overall big-picture view. The SLB rate is probably more useful for gauging bearish sentiment.
 
A lot of noise if the stock is optionable as short could be used to hedge puts that might end up as married put (overall a bullish use and fairly common) or as part of collars or some other usage which actually would have a bullish directional bias.
 
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In a bearish market is short interest to be expected high on a vast set of stocks?

In this case can't global short interest levels be used to try reading the overall bullish/bearish market sentiment?

nt
 
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novicetrader69 said:
In a bearish market is short interest to be expected high on a vast set of stocks?

In this case can't global short interest levels be used to try reading the overall bullish/bearish market sentiment?

nt
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You're asking, "can I use short interest to determine when players will change their mind"?

No, you can't.
 
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