Prepare Yourself: Be Aware Of Short Ratios

 |  Includes: AAPL, GOOG, USNA
by: Furbonacci

In February of 2007, 2 months out of college I joined a prop trading firm on Milk Street in Boston Massachusetts. During my first few months there I helped developed a filter we liked to call "the atomic filter". This filter was great during really slow days because it helped us find what stocks were making large moves on intraday charts. A stock would pop up on the filter and 95% of the time it would be one large print that had to pay above asking price and that would be the end of it. Then 5% of the time there would be an incredible move in Google (GOOG) or Apple (AAPL) that I would just end up watching on my screen without participating in.

Maybe that's why I wasn't the best trader and eventually had to leave in February of 2008. I was awestruck looking at a screen going absolutely parabolic on the intraday. Sometimes I tried to buy in after the big move only to get burned and have my confidence shattered. I learned a lot from those day trading days and a lot of what I learned has helped me make sense of the day to day market fluctuations. Anyway, the point of the story is, if I had known what stocks had the highest short ratios (aka days to cover), it would have given me the conviction to get into a trade or stay in one for the larger gains that were to come. It is important to be aware of stocks with the highest short ratios because those are where the greatest short squeezes often occur. By having this list handy those who seek volatility can be more successful getting into equities that are moving and have that extra catalyst of having some of the highest short ratios in the market. Please remember that shorting a stock with a very high short ratio can be deadly, literally.Click to enlarge
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I would take note that USANA Health Sciences (USNA) has appeared in a recent value screen of ours.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.