Short interest is a powerful but lesser-used indicator of informed sentiment.
It measures the number of shares that investors are shorting. In other words, it’s a measurement of how strongly investors think the stock’s price is likely to fall.
Because the long-term price trend of stocks over the last 100 years has been up, short selling is a tricky discipline. Short sellers are therefore considered by many to be among the smartest investors on Wall Street. Their mission is to hunt for stocks that will decline, either because of fraudulent or aggressive accounting practices, over-valuation, loss of competitive edge in the marketplace, or other negative factors.
Since short interest data is available online, everyday investors can use this to measure sentiment about where a stock is headed.
In Chaikin Analytics, “Short Interest” is one of the five sub-factors listed under the “Expert Opinions” factor of the Chaikin Power Gauge stock rating. Low short interest will be shown as green (“Bullish”), meaning there are not a lot of bets against the stock, while stocks with high short interest will be “red” (“Bearish”).
Looking for a list of stocks where short interest has had a big change recently?
You can easily do that by accessing the Short Interest Gainers/Losers Hot Lists in Chaikin Analytics. These are lists of stocks with the largest positive or negative changes in the “Short Interest” Chaikin Power Gauge sub-factor over the previous month.