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Strategies & Market Trends : Classic TA Workplace
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To: bcrafty who wrote (69970)3/29/2003 5:33:11 PM
From: skinowski  Read Replies (1) of 209892
 
The big guru about the importance of short interest is Bernie Schaeffer. He wouldn’t take a long position in a stock unless there is a decent short and/or put interest. (Actually, I would recommend reading Bernie’s book on options). In part, the idea is the same as the Max Pain – option sellers will buy or sell the underlying with the purpose of protecting their options. A large put open interest along with a sizable short interest gives the "long" trader an extra edge.

Short interest reflects the degree to which the public is skeptical about a rally – and in addition, it also constitutes a pool of "obligatory" buyers. Together, those factors constitute additional support, or a… floor. Bernie loves strong uptrending stocks, which keep moving up against a skeptical crowd.

For short plays he will look for a combination of weakness and bullish expectations.
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