Short interest can be an extremely helpful too for traders looking to get a feel for how a stock might react to a catalyst or gauge the overall bullish or bearish sentiment in a stock. Stocks with extremely high short interest can also be candidates for a short squeeze, one of the most volatile near-term trading events in the market.
A stock’s short ratio is the number of shares held short divided by the stock’s average daily volume. While short interest tells traders just how many shares of stock are held by short sellers, short ratio compares a stock’s short interest to its typical volatility. A stock with high short interest and low trading volume could potentially be a candidate for a short squeeze.
Why Is The Short Ratio Important?
Short ratio is also known as “days to cover” because it represents how many days of average trading volume it would take for the short position to be reduced to zero if all of the daily volume were short covering. That is a hypothetical scenario, but it helps to visualize what the short ratio represents.
If short sellers were to exit their positions in a stock with a high short ratio, at least one of two things would happen. It would either take them a long time to do so or it would require a large surge in trading volume relative to the stock’s average daily volume. While there are no guarantees in the market, both of these scenarios can potentially lead to short squeezes.
Here are 12 stocks with short ratios above 50, according to Finviz.
- MiMedx Group Inc (OTCMKTS: MDXG), 329.5 ratio.
- Sunlands Online Education Group - ADR (NYSE: STG), 148.0 ratio.
- Citizens, Inc. (NYSE: CIA), 97.3 ratio.
- Odyssey Marine Exploration Inc (NASDAQ: OMEX), 87.9 ratio.
- Consumer Portfolio Services, Inc. (NASDAQ: CPSS), 82.8 ratio.
- EVI Industries Inc (NYSE: EVI), 80.6 ratio.
- Siebert Financial Corp. (NASDAQ: SIEB), 77.6 ratio.
- Accelerate Diagnostics Inc (NASDAQ: AXDX), 77.2 ratio.
- Theratechnologies Inc (NASDAQ: THTX), 57.1 ratio.
- Stantec Inc. (NYSE: STN), 54.1 ratio.
- Tootsie Roll Industries, Inc. (NYSE: TR), 53.3 ratio.
- Seritage Growth Properties Class A (NYSE: SRG), 51.4 ratio.
Short squeezes can be extremely difficult to time and trade, so investors need to be careful. In addition, many of these stocks are heavily shorted for good reason due to problems with the companies’ fundamentals or business models, so buying and holding can be a costly approach.
10 S&P 500 Stocks With The Most Institutional Buying
See more from Benzinga
- Here's How Much A 30-Year Mortgage On A 0,000 Home Really Costs
- Microsoft Option Trader Bets M On 10% More Upside
- Q3 13F Roundup: How Buffett, Einhorn, Ackman And Others Adjusted Their Portfolios
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.