Last data point on SPLN's short interest showed that total positions exceeded the average for the internet industry (of course, it is becoming increasingly difficult to define this precisely as more and more blue chip companies enter this exciting area) by over 100%. Basically, a lot of traders had exposed short positions a few weeks ago.
I suspect that the imbalance has grown as many have sold SPLN early on the way up, anticipating a 'normal' pull-back. Such behavior is typical of many traders. This simple concept of trying to call the stall in the trend might work well for quite a few NYSE issues and for non-technology stocks in general. But for technology issues, and especially for internet stocks, such a strategy may end up severely punishing otherwise knowledgeable market participants.
As we have seen, SPLN has been an odd mover from day to day. It is now up about 33% from the platform near 30. For those who have not followed the stock closely, or who have forgotten the past behavior, it seems like a great time to sell short and wait for the near-term pull-back. But those who have watched know that continued sequences of jumps may occur as well.
Who knows? Daily predictions are always a great challenge (usually, I focus on long-term trends, but it is also interesting to think about short-term fluctuations every now and then and what drives them), making it hard to predict the success of short sales. But one thing is certain - the risk to reward ratio on such positions has decayed substantially over the last couple of weeks.
SPLN has made such a fabulous move from well under 20 to around 40 in such a short period of time that betting on a pull-back, at least in the near-term, seems like such an obvious strategy. And that is precisely why one should be be very cautious.
The trend remains the greatest of friends.
J.M. |
