Jeez, with ffool on board, trading theories advise to get out. LOL
There is always something to learn for fun. I looked at the short ratio(days to cover) as an indication of sentiment. Found a nice read on the subject and compared ONCY with KERX.
: floats- about the same. short % of float ONCY at 8.7% KERX at 15%. Short ratio -ONCY, 71.30 (days to cover) KERX-8.7 Our avg volume is down to 76K(10 days). Short ratio higher than 10 attracts buyers and scares the hell out of shorts(speculative). Our short interest fell by 10K last month, which is basically nothing. That's what I base my belief on that our shorts are hedge by the bigs not a speculative short..
" The short ratio is the number of shares sold short (short interest or bets that the stock will go lower in price) divided by the average daily volume. This is also sometimes referred to as the "days to cover" ratio because it tells approximately how many days it will take short-sellers to cover their positions if good news sends the price higher.
The higher the ratio, the longer it would take to buy back the 'sold' (borrowed) shares. And in theory, the more short positions there are to cover, the stronger the short covering rally would be.
Many people who use this indicator like for the number of "days to cover" to be higher than 8-10 days. It's generally believed that a short ratio of that size could prove difficult to cover and therefore trigger a strong rally on any hint of an upswing. (My personal preference is to take that into consideration, but also compare it to the industry's average ratio and the stock's own historical ratio.)
And while I wouldn't recommend using just the short ratio as the 'be all and end all' of screening items, I do think it can be a great tool for helping define great opportunities.
For example: sometimes when I'm looking for stocks that have been in a lengthy consolidation, I'll look for those stocks with high short ratios.
Because consolidation ranges are basically areas of market indecision. Bets are being made by both bullish and bearish investors. So finding stocks that are going back and forth near their price highs with a growing short ratio shows that ever-increasing bets are being made on prices going lower.
However, if the stock breaks out to the upside, properly positioned bulls will more than likely add to their winnings ... undecided traders will now be convinced to get long ... and shorts will have to scramble to cover their bearish bets. This can be an explosive situation.
This can be used quite effectively for bottom fishing too.
When a stock is getting battered and pundits are wrangling over whether it's the bottom or not, you should pay close attention to the short ratio.
Of course, there has to be a reason for a stock to move higher. So seeing an improving fundamental outlook is important.
But when lopsided market sentiment seems to be at its worst (reflected in investors' buying and selling) the short ratio can be just the thing to uncover extremes.
For example: for beaten down stocks you can search for companies near their 52 week lows with increasing short ratios. Or better yet, look for short ratios above their average values or even ones that are at (or near) their historical highs.
For stocks moving higher, try looking for historically high short ratios for stocks up 20% or more (new uptrend) or that have just rallied past an important moving average like the 50 or 200-day average. (Funds will often pile in at those points. So a large short ratio could propel the market significantly higher as huge buyers bid the market up while panicky shorts chase it even higher just to get out.)"
While ONCY is not representative of an avg stock, the short ratio fully applies as a trading indicator, given the volatility is expected to increase substantially regardless of quality of news. My point is; a lot hes been discussed here about shorts and effect on PPS. But IMO we are lucky not to have large speculative short traders. REO maybe out of the screen for most traders but whoever has researched ONCY for trading purpose is well aware of it's potential and high risk of shorting it at this level.
Have a nice weekend.
I thought some of the "traders" would catch on and ask: So what was the noise about?
After the basic theory behind "short ratio" enlightened those of you who are bothered by the shorts, there is the last rule in place to govern short trading: THE LENDER CAN DEMAND THE SHARES BACK AT ANY TIME. Who is the lender? usually an institution which is in ONCY to make money or your broker. The institution is well aware that the shorts are working against it's interest, so they will demand the shares in the most opportune time. The borrower (the shorter) will have to go to market to cover. If all of you called your broker and just specify that your shares not be used for shorting purpose, your broker is required by law to demand the shares back . The shorts have to find shares to return them to your broker.
" In general, brokerage accounts are only allowed to lend shares from accounts for which customers have "debit balances", meaning they have borrowed from the account. SEC Rule 15c3-3 imposes such severe restrictions on the lending of shares from cash accounts or excess margin (fully paid for) shares from margin accounts that most brokerage firms do not bother except in rare circumstances. (These restrictions include that the broker must have the express permission of the customer and provide collateral or a letter of credit.)
Most brokers will allow retail customers to borrow shares to short a stock only if one of their own customers has purchased the stock on margin. Brokers will go through the "locate" process outside their own firm to obtain borrowed shares from other brokers only for their large institutional customers."
Still scared of the shorts? IMO only failure by REO to deliver will doom the stock. Period. So go ahead shorts, we can use the extra boost when the rally starts.