Macro Wrap – How Much Has Short Covering Driven Their Rallies? $TSLA, $NFLX, $P, $GME

by Enis October 10, 2013 6:51 am • Commentary

Back in May, we highlighted the persistence of high short-interest in some of the big year-to-date-winners.  Dan posted commentary with the title, “Concentrated Longs with High Short Interest are a Trader’s Dream” which highlighted TSLA, GMCR, FSLR, and HLF.  I followed that up with a Macro Wrap detailing how short interest had changed for the big winners in 2013.

With the absolute battering experienced by some of the YTD leaders in 2013, we wanted to take a look at how much short interest (and hence, one group of potential buyers) has been reduced over the past six months:

Short Interest 6 mths ago (% of float) Most Recent Short Interest (% of float)     Change
TSLA                 40%                      27%         13%
NFLX                 17%                      12%          5%
FSLR                 27%                      15%         12%
P                 25%                      20%          5%
GMCR                 27%                      27%          0%
HLF                 37%                      31%          6%
GME                 41%                      16%         25%
BBY                 11%                       9%          2%
MU                  7%                       9%         -2%
LNKD                  4%                       3%          1%

The largest reduction has been in GME, which has seen short interest plummet from around 40% of float to around 15% of float in the past 6 months.  GME is up 60% since April, with a good bit of fuel for the rally undoubtedly coming from short covering.

More surprisingly, MU has actually seen short interest increase even as the stock has doubled since April.  Granted, short interest was much lower than the other stocks to start, but still a surprising development.

For the most part, the big winners have seen short interest decline, but not as much as I would have expected given the extent of the moves that we have seen.  Stocks like TSLA and P that have more than doubled in 2013 still have relatively high short interest ratios, and less short covering than I would have expected.

GME is the one stock that stands out as a name with dramatically lower short interest, and a much higher stock price.  There is one other aspect of the technical picture in GME that stands out like a sore thumb.  Stay tuned for those thoughts in a post focused on GME in the next couple of days.