This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cramer: Short Selling Doomed Netflix

But the supply of stock outstanding that's needed to locate shares to sell short wasn't expanding at all. In fact, it was contracting because of Netflix's buyback.

So, shorts kept shorting and trying to borrow stock and they couldn't locate it.

When you can't locate stock you are forced to cover or buy back shares. When you saw the stock skyrocket from $50 to nearly $300, some of that demand was from natural buyers. But much more was from buyers who were forced to cover. In an amazing confluence, just at the height of when shorts were being forced to cover like mad, Netflix committed its now legendary screw up.

The longs panicked, but more importantly the shorts who would normally cushion the blow with their buying had been wiped out by the rise. The result? No floor. None. Without growth, with a shrinking subscriber base and with no natural covering short sellers what happens?

You got this astounding collapse from a level that it should never have been. You want to know why Netflix soared? Blame the short selling process. You want to know why it collapsed? Blame management, for certain. You want to know why it fell with such velocity? That's what happens when a stock gets squeezed up to the point that there's no one left to cover.

At the time of publication, Cramer had no position in any of the securities mentioned.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
NFLX $658.31 0.00%
AAPL $126.44 0.00%
FB $87.28 0.00%
GOOG $523.40 0.00%
TSLA $280.02 0.00%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs