The most recent short interest data was recently released by the NASDAQ for the 09/30/2013 settlement date, and Ecolab, Inc. (ECL) is the #188 most shorted of the S&P 500 components, based on 4.10 "days to cover." There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.
In the case of Ecolab, Inc. (ECL), the total short interest at the 09/30/2013 settlement date was 3,554,791 shares, which compares to the average daily trading volume of just 866,065 shares, for a "days to cover" ratio of 4.10.
When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single ECL share traded represented a short position being closed, then at the average daily volume of 866,065 shares it would only be during the 5th trading day that every short position would be closed.So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 5 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV