Number Of Shares Shorted

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Indicator Description

If a large number of investors decide to short sell an equity instrument within a small period of time, their combined action can significantly affect the price of the stock.

Shares Shorted

 = 

Shorted by Public

+

by Institutions

Number of Shares Shorted is the total amount of shares that are currently sold short by investors. When a stock is sold short, the short seller assumes the responsibility of repurchasing the stock at a lower price. The speculator will make money if the stock goes down in price or will experience a loss if the stock price goes up.

Number Of Shares Shorted In A Nutshell

Number of shares shorted is a key number to look out because you want to see how many people are betting against the company so to speak. Another terminology you may have heard is short interest. For example, if there are 100 shares outstanding and 10 people are short, then there is a 10% short interest in the company. Many people fail to realize there are people on the other side of the fence, hoping the company falls in stock price. The numbers of shares shorted and who is shorting them can be crucial in determining where the stock may be going.

You want to look at the institutional investors to understand where their money is going because it could be a good insight as to where they think the market is going to go. Along the lines of shares shorted, you may want to observe who is selling there stock at the company, such as executives. If they’re buying it, they may be confident that the company will continue to succeed.

When people evaluate stocks, they look to the upside and determine how far it can go. Using data they hear from reports or looking at a stock chart, they are trying to figure out what will propel the company further. However, there is the flip side to the equation that the average investor may not know, and that is the ability to short a stock. Shorting a stock is when you borrow the shares from your broker, sell them to the market, hoping to buy back at a lower price and return them to the broker, keeping the difference. Shares that are being shorted could indicate people are seeing indications the company stock could be pulling back.

Closer Look at Number Of Shares Shorted

When you run the numbers side by side, it is almost a vote to see where the stock is going. If you see there is 60% short interest in the stock at the moment, you may not want to get in front of that train buying for the upside. This information is useful when comparing all forms of data because it digs below the surface level of the chart and tells you where the money is actually going. Using this in conjunction with the Money Flow Index may be a good combination as to anticipate momentum and price action. Be sure to use this on a demo account to ensure it fits your trading style. Always research to better understand the tools you are using and to view other opinions on the matter. Again, there are almost always people betting against the company, you should know how many and if it is larger than the people buying.

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