Tuesday, January 27, 2009

NASDAQ Short Interest Schedule

If you're interested in who's shorting NASDAQ-listed stocks, click here:


The next information release date is today, January 27, 2009, after 1:00PM Pacific Standard Time. "Days to cover" refers to the number of days it would take for the short sellers to buy back stock. The number of "days to cover" comes from dividing the number of shares sold short by the company's average daily volume.

You can interpret the level of short interest in at least three ways:

1. If short interest declined, it usually means investors are more optimistic about the stock.

2. If short interest increased or is high, it means many investors (or some big investors) are pessimistic about the stock.

3. If you're a contrarian, however, you would view a high level of short interest (or a dramatic increase in short interest) as a positive sign. If the short sellers are wrong, at some point, they all have to buy back the stock. Thus, assuming bankruptcy is not an option, a high level of short interest can establish a floor for a stock's price. This is because short sellers must buy back the stock at some point, and many short sellers are inclined to take profits as soon as possible. When short sellers start buying back stock, it results in a "short squeeze," which can drive out other short sellers and cause an increase in the stock's price.

I am particularly interested in the level of short interest in Intel (INTC). Intel recently announced layoffs, and now, all of its bad news is already public. Therefore, assuming short sellers are rational, they would have covered their positions, leading to a decline in short interest.

On the other hand, I'm biased--I wrote earlier that Intel's stock price would move up because most of the negative information has been released, and I'm bullish on the stock. Given its superior market position--which some might call monopolistic--and its stable financial condition, Intel at between 12 and 14 dollars may represent a good opportunity for long-term investors.

Disclosure: I own shares of Intel (INTC).

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