A Penny Stock’s Short Interest: What It Tells You
Source: http://pennystocker.com/short-interest-in-a-penny-stock-what-it-tells-you/Posted on Tuesday, May 5th, 2009 | In Investing Lessons, Small & Micro Cap
Short interest is the total number of shares of a particular penny stock that have been sold short by traders but have not yet been closed out or “covered”.
Short interest is calculated by dividing the number of shorted shares by the number of shares outstanding (all available shares offered), or alternatively you can just go to ShortSqueeze.com and they give the information to you automatically when you input a certain penny stock’s symbol. Short interest is only calculated twice a month in stocks, not everyday, so keep that in mind.
If you go to ShortSqueeze.com you’ll see what’s called “days-to-cover” which means that’s the estimated time it would take to cover all shares that are short in the penny stock.
Here’s The Point: The higher the days-to-cover aka short interest ratio, the more likely they’ll be a short squeeze!
So knowing this, how does it help you? Well, whenever I mention a penny stock is setting up to short, and you DO in fact open up a short position in it…you should check the short interest of that penny stock to see the possibility/magnitude of a short squeeze.
Here’s another point to consider: Say there has been a huge manipulated/hyped run of a penny stock that we all know is a scam company…every pennystocker out there is just waiting to short this thing at the right moment. Then that moment happens but now theres so much shares short (because of it’s popularity) that every trader now is vulnerable to a short squeeze.
If you’ve read this post and still don’t exactly know the whole deal behind a short squeeze, get my FREE eBook, cause I explain everything about the short squeeze.
The lesson here is to always consider the short-biased popularity on a given penny stock because the more shares short the more you’re at risk for a squeeze. Don’t get juiced!
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Last 5 posts by Justin Bostwick
- SEC Charges 8 - May 23rd, 2009
- 6 More Penny Stocks Picks: “Buy The Hype, Sell The News” - May 22nd, 2009
- Penny Stocks To Watch For Friday The 15th - May 15th, 2009
- Six Penny Stocks To Watch That Could Make You Money - May 12th, 2009
- The Framework Of An Afternoon Fade And Why It’s So Essential To Short Selling Penny Stocks - May 7th, 2009
 About Justin Bostwick (http://pennystocker.com)
My name is Justin Bostwick and I am an 18 year old college student at the University of Tampa in Florida. Pennystocker.com was launched on March 25th, 2009 with $7,000 in capital with a goal to turn that into $XX,XXX over a period of time buying and shorting penny stocks. Watch as you and I both learn what it takes to profit down in penny stock land aka the “gutter” |
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