Here's the problem, as I see it, and why I sold after earnings and it was headed down. It's not so much shorts sitting there shorting away. It is shorts who are generally holding their position pat, thus "stretching the lines" for the long side. In other words, what the shorts are doing is increasing the the ranks of people who are willing to stand up and own the company, at a time when sentiment is somewhat negative. If there was only a small short position, about 9 million shares would NOT need to be held by longs to balance things out. Now that there has been a bit of negative news, any new long looking at getting is likely to be thinking LONG TERM. Previously, when I got in, I was looking MEDIUM TERM which I typically define as 6 months. I felt that a short squeeze would occur if earnings held up through year end. Make no mistake, a short squeeze situation was very close, but it never really materialized. It collapsed, and now with "the lines stretched" and pain being inflicted, it is not really possible to find enough longs willing to commit to the long term largely because they fear that the shorts may be correct in the long term about the staying power of the brand. Ultimately, this could be a company that just kind of hangs on and goes through a shrinkage phase.
All this said, there could be one good rally left regardless of the long term outlook. I may try to bottom fish and ride a rally that could occur if Q4 earnings are good, which would not surprise me. If that happens it could be a "last hurrah," or perhaps the company will find a way to continue to grow for years to come.