Valuation Shorts Come Up Short

Shorts are in the driver's seat -- and the car's crashing into the retainer wall! I can't underestimate the level of panic in the short world right now. NutriSystem (NTRI - commentary - Cramer's Take)? All it did was what I thought it could do, and it goes up $17? Can you believe this Hansen (HANS - commentary - Cramer's Take) -- is there a day that the shorts don't get squeezed there? Travelzoo (TZOO - commentary - Cramer's Take)? Short-selling zoo is a free-fire zone! How about Carpenter (CRS - commentary - Cramer's Take)? I mean, come on, that's a steel company.

Yet when I scan the short-selling stats, they aren't showing much increase at all. How can there be such a panic?

I don't know, but the thing that all the squeezed stocks have in common is that they are valuation shorts. They aren't shorts based on chicanery or some sort of Enron-like scam. People just bet that these companies can't keep the growth up. That's just the kind of shorting that will almost always land you in the poorhouse. It is also the kind of shorting that must be done with puts to stop yourself out.

Those of you who are shorting on valuation, understand that you will be forced to cover until the stock breaks down. What I don't understand is why don't people realize that the best valuation shorting -- the only kind I ever liked -- was after the breakdown. There's ample time once the charm is broken and you can ride those suckers -- think Taser (TASR - commentary - Cramer's Take) -- down with impunity.

In the meantime, look out above!

Random musings: Thanks Michiganders, for a fabulous, fabulous time on "Mad Money" last night!

At the time of publication, Cramer had no positions in the stocks mentioned.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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