Would someone please be kind enough to answer a few questions from a newbie shorter and lurker of this thread?
It was only about a month ago that it finally sunk into my brain that even -- or especially -- during the recent market boom more stocks were going up than going down (duh!). So I figured it was time I learned about shorting. In the course of my self-education, I ran a bunch of screens on Telescan, looking for no-goodnik, no real prospects, no earnings cashburners. What came as something of a surprise to me is that all but a tiny handful of these no-goodniks had already lost a good deal of their value, generally beginning about six weeks ago.
Question No. 1: Does it make sense to short a stock that has already fallen precipitously to close to its 52-week low? (I did do that, and successfully, twice; but pulled out before the full carnage was done, for fear that somebody would begin feeling sorry for the stocks, and try to drive their price back up again.) After all, how low can even a no-goodnik go? In other words, would it make more sense to try to find a company the price of which has not (yet) fallen quite so far?
Question No. 2: Is it better to short a high-volume stock, or a lower-volume stock (by which I do not mean a really thinly-traded stock), or does it make any difference?
Next subject - short interest. I have a little collection of broadcasting companies here that I am looking at as possible short candidates. What puzzles me about them, however, is the short interest info (as provided by Yahoo). Now, bear in mind that all of them have been experiencing about twice their usual volume.
36.6% (!) of one company's (PGTV's) float is being shorted; the short ratio is 4.9. (Or rather, it was as of early March.) In the case of another (UPCOY), 7.5% of the float was being shorted, as of March 8, while the short ratio was 31.6.
Question No. 3: Is it worth paying any attention at all to data that is more than a month old, and that stems from the pre-crash period, to boot?
Question No. 4: Which of these figures, in general, is considered more significant -- the percentage of the float being shorted, or the short ratio?
Question No. 5: I read somewhere that a high short ratio is considered a "bullish" sign, while a low one is considered "bearish." That strikes me as odd; I would have thought it would be the other way around. (Although Telescan is predicting a sharp rise in UPCOY's price -- gosh knows on what basis. By Telescan's own calculations, its technicals are awful, and it has no momentum.)
Question No. 6: Seems to me that if 36% of your company's float were being shorted, you would have reason to worry. Looks like an awfully high number. Is it? And what about a
short ratio of 31.6? Don't recall ever having seen a number that high.
Any kind of response would be appreciated. Thanks in advance.
jbe |
