Jim F.: Anyone who is not classified as a professional trader on one's tax form can write off losses. Therefore you will see stocks that have been strong performers have good finishes. Look at THQ last year, which went from $20 mid-December to an all-time high in the 23s on the last day of the year. Longs don't want to take profits until Jan. 1 to postpone taxes and shorts want to take losses, forcing them to buy. So the price of strong performers goes up at the end of the year due to both lack of selling and shorts covering. The losers of course get pummeled by tax-loss selling, which can go all the way up to the last day of the year on some stocks. One of my best trades last year was selling THQI on Dec. 31 and buying beaten up stocks in the Apple universe on the same day, including AAPL at $13.50. The higher THQI goes the rest of this year, the fewer longs who have a tax loss and the more shorts who are at a loss.
Jim M.: THQ's high short interest first surfaced around the time of the huge WCW revenues. I think it is simply a bet that THQ can't replace the revenues. In general, the shorts have been early, though they seem to get one good covering opportunity a quarter. Many of us think that THQ will replace the revenue, though we will have to wait until E3 next May/June to decide how Q4, 1999 looks. The latest word from THQ was that they plan on having a WWF game by December, 1999 but I think that's optimistic.
My guess is that tomorrow THQ will follow the market, as both seem poised to either break up past 8500/$20 or succumb to some profit-taking. What do they say about Fridays, on bad weeks shorts cover, on good weeks longs take profits? Something like that.
Good luck,
Marc |
