Short Interest

[Stocktrading101]

Especially when you are trading penny stocks, this indactor is a huge tell. If over 5% of the float is being shorted, you got ask yourself, does someone just know something I don't?! These are also open for short squeezes though. After alot of chart research, anything with a high short interest usually takes a nose dive long term (high as in over 10%). You usually won't see much short interest in large caps to my knowledge. Then again I haven't done alot of research on that.

[Matt Moss]

It seems an informative stat for the long term, but a roll of the dice for the short term. Obviously it seems to indicate that the stock could be poised to break, however it could also be poised for a squeeze. And we all know that in a penny stock those can be incredibly devistating. Its curious, and I don't know enough about it to make any definite analysis.

[psykiv]

I just avoid penny stocks altogether. I only have to be taught a lesson once to learn.

Bought a company at $3.10. Went up to about $3.75 in a few days. Stoploss (thankfully) kicked in at $2.30. Currently at $2

Ive seen other similar fates with dozens of other penny stocks.

I avoid them now.
Besides, sometimes for penny stocks, that information isn't even avaliable.

But interesting... Thanks!!

[Stocktrading101]

pyskiv I know exactly what you mean man and I feel for ya. They can be pretty wild and you have to be extra catious. BUT, the other side of the coin yields great returns if you can trade um right. I personally will like to day trade penny stocks just because the spreads are alot smaller to make your gains.

Regards,

[lehayes]

As a side note for those who may read this:

A penny stock is defined as a stock that is traded on a bullitin board or pink slip market. It is not traded on any of the major markets such as NASDAQ, NYSE, etc. It does not neccessarily mean that the stock is less than a dollar a share, but is common to find it as such. Penny stocks can be found to be as high as $5.00 or as low as .0001 per share.

Because these stocks are not traded on a major exchange, they do not play by the same guidelines laid out by the major exchanges. This makes them a higher risk. Furthermore, when most stock ticker symbols will report activity on major exchange stocks regularly, penny stocks are very much a delayed ticker. In the matter of 5 minutes, a penny stock can go from $.75 profit to a .25 loss. This may represent one ticker value. Because of this situation, penny stocks carry an even higher risk and are not considered a good investment for a starting investor. Also, penny stock are best evalauted using fundamentals not technical analysis.

[Matt Moss]

My finance professor was discussing that a stock with an abnormally high short interest could be a potential buy because it indicates pent-up demand. All those shorters HAVE to cover eventually, and also it leaves them open for a squeeze if the short interest is high.

It can be a positive or a negative.

[WallStGolfer31]

If I am looking for a short squeeze I look for a stock that has a SI higher than at least 10%, I have often times found them as high as 35% of outstanding!!!!!!!

On the penny stocks: Any stock that trades OTC should be looked upon as highly suspect becasue it is relatively easy to put a company that is non-existant on the OTC or BB markets. They have no regulation and do not have to submit SEC doucments, They don't even have to report earnings if they dont want to!!!!

[Stocktrading101]

Ya, there are some interesting situations where SI really can get corrupt in regards to penny stocks. I was reading up on this somewhere (I apoligize don't recall the source) and it was stated that sometimes the SI will get so high 30-40%+ because there is corruption going on. I dunno how they do it, but people short shares that arent even owned. Apparently, the SI can get to 100%+, which is when you definately know something is not right.

In the past I have seen SI signal some major downward trends. If you are careful and watch it each month it can give tell-tale signs of the direction of the stock. For instance, in biotechs a sign for me was if I knew news was going to be released soon, and the month prior to release SI falls 50%+ and sometimes to almost nothing. Let's ya know that if there are people that have inside info, they are bullish as well .