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Strategies & Market Trends : Trend Setters and Range Riders
MSFT 506.99-1.5%3:59 PM EST
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To: Susan G who wrote (4267)11/21/2001 8:01:36 AM
From: Doug Robinson  Read Replies (1) of 26752
 
I'm showing 5.5 million shares short and that's approximately 8-9 days but it's still a good percentage of the float. The message was a heads up one as the activity during the recent past indicates an aberration from the norm. The key in determine if you are going to enter a highly shorted stock, assuming you are hoping for a significant move, is to determine if the buying can be classified as good or bad. If it's good buying than you can enter with a positive expectation but you'd be foolish to enter if the buying was primarily short covering that wasn't supported by strong buying from those likely to hold their new positions for more than a week or two.

I'd suggest keeping a copy of the shorting information as it appears in the WSJ or IBD. Many of the services providing information are frequently in error. The most recent months reports will be coming out shortly. You'll find some companies that have much higher percentages and days to cover exceeding 20 on average volume.

Regarding news. It depends if it's a surprise announcement and who holds the shorts. The big boys are surprised sometimes but more frequently they have already taken the appropriate action beforehand . . hedge funds don't like being surprised by news that could have a major impact on a stocks price. As you well know, significant volume and price increases frequently occur before such announcements. When you find the big boys buying and the hedgies covering early, you've found a situation that can be explosive to the upside.
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