Given the extraordinary short covering rallies that occur due to short interest (think AMZN), it is worthwhile to take a look at this from time to time. For all stocks, not just NASDAQ stocks, you can look this up here. On Yahoo, you only get the older (30-days stale) numbers. So if you like to look at this sort of thing (and I'm not pretending that I have any great insights), you may wish to use the above link.
I own HERO as you know, and I decided to look at the short interest in it given that they report tomorrow. I found this 4-fold increase in short interest and a 5 fold increase in volume interesting:
Tomorrow they report. So if there is a positive earnings surprise, there will be some extraordinary fuel for the fire. Given the fundamentals, had I looked at this short interest sooner, I don't think that I would have been dissuaded from buying. I'll post tomorrow. My position is up 8% , and I have previously closed positions that I've made fine money on. So I'm not feeling vulnerable, even if the news is bad. But if it goes down 20% then I might have a different idea about that!
As you know, I have an amateur interest in technical analysis. I'm not facile with it my any means, but I am becoming more competent in recognizing opportunities as well as trouble spots. My point is that it would seem to me that there ought to be a dimension to technical analysis--automatic, not one that you had to do by hand--that would register changes in short interest from month to month as you were looking at chart readings. What would be interesting to see in the volume chart is some metric that would register either the absolute amount of short interest, or a percentage of short interest.
Why would this matter? Well, I'm no expert as I say ad nauseum. But if the price action is affected by short covering due to high short ratios, in my view that is a 'false tell' relative to the long term health of the stock. Sure, the fundamentals may have improved which caused the initial price increase. However, the subsequent surge due to exposed shorts is likely to push the price further beyond 'ordinary' reaction. Accordingly, the price overshoots what one would expect to be a more balanced price owing to underlying fundamentals. My conclusion, then, is that if one buys into one of these surges without understanding the short position, you risk falling into the 'reversion to the mean'.
Perhaps I'm overthinking it, but I don't think so. I'd welcome your comments.
I am re-reading my delightful little book, and I urge you to add this to your investing library.