By David Sterman
NEW YORK (StreetAuthority) -- A pretty remarkable shift in sentiment happened in the stock market last month and few may have noticed. The short positions among the most heavily shorted stocks on the stock market shrank by a major amount.
Consider the drop in these short interest positions for stocks that trade on the New York Stock Exchange.
I can't personally recall seeing such a big two-week drop in recent memory. What happened?
Well, the major averages didn't move much during those two weeks, so it wasn't a matter of profit-taking or fears of a short squeeze. Frankly, it's a bit of a mystery and it will be interesting to see the next set of data, scheduled for around July 25 (covering the period through July 15).Yet, it's noteworthy that the one stock in this table that did see a rise in the short position was eventually hammered -- Supervalu (SVU) fell nearly 50% on July 11 after the company reported a weak fiscal first quarter and a major restructuring. This beleaguered supermarket chain has company. Short-sellers have also been targeting chip maker AMD (AMD), which has the 12th-largest short position on the NYSE. The company recently warned of a quarterly shortfall, and shares are now down nearly 20% since the month began. Short-sellers also boosted their position in coal maker Patriot Coal (PCX) a hefty 26% in just the last two weeks of June (to 32 million shares). Days later, the company would declare bankruptcy, reaping a huge payday for short sellers. Bearish bets also paid off in consumer electronics retailer HHGregg (HGG). The short position of nine million shares amounted to a whopping 55% of the total float. So after an announcement that quarterly results were dismal, shares slumped a hefty 37% on July 11. Call it dumb luck, but the four biggest losers thus far in the third quarter were all heavily shorted. Indeed, whether it's an expected weak quarter or an outright bankruptcy declaration, short sellers are clearly on their game right now. You may want to check out the short position on any of your holdings, and if it's a large one then you need to quickly learn why the short sellers are so bearish. In this market, there's no shame in raising cash, and these heavily-shorted stocks may be good candidates.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV