Recent pullback in high-fliers coincides with a rise in heavily shorted stocks


While much of the attention in recent weeks has been on high-flying momentum stocks falling back to earth, there’s also been a big rally among many of the stocks with largest short positions.

Rallies in heavily shorted stocks are being driven by hedge funds pulling back on all their stock positions, so as bullish positions in high-growth stocks have been ditched, short positions have been closed out as well.

Among the top 10 most shorted stocks, seven have rallied over the last month - with four up by double-digit percentages - even as the S&P 500 has dropped 0.8%: GameStop (GME, +11.5%), US Steel (X, +13.9%), Joy Global (JOY, +7.2%), ADT (ADT, -0.9%), VeriSign (VRSN, -8.6%), Essex Property Trust (ESS, +0.6%), Quest Diagnostics (DGX, +13.1%), Microchip Technology (MCHP, +2.8%), Western Union (WU, -1.9%), Frontier Communications (FTR, +13.6%).

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Comments (4)
  • SteveTheHawk
    , contributor
    Comments (2170) | Send Message
     
    I held FTR for two years. Took in some nice dividend payments and some decent capital gains. I recently sold for $5.65 while wondering if a short squeeze was taking place.

     

    I don't have a clue if it will move higher, but I see it as a risky stock. I focus on DG stocks. FTR was my little fling into more speculative issues, but it's time to stick with quality dividends.
    9 Apr 2014, 07:50 PM Reply Like
  • kennwo
    , contributor
    Comment (1) | Send Message
     
    An investor for the past 20-plus years. portfolio $1 m plus. Heavy in MLPs, pipelines in particular. Positions in XOM, CVX, MCD, KO, T, VZ, MO, PM and ABBV.
    Made bundles in the Canadian trust arena until PM Harper intervened. Lost big time in the fall of 2007 but have recovered and more. Am approaching 85; time to start winding down.
    9 Apr 2014, 09:08 PM Reply Like
  • User 14422332
    , contributor
    Comment (1) | Send Message
     
    Can somebody explain ... Why would hedge funds reduce all their stock positions, both long and short?
    10 Apr 2014, 04:12 AM Reply Like
  • dezee
    , contributor
    Comments (4050) | Send Message
     
    Have to be more specific on that, can be many reasons.
    10 Apr 2014, 05:44 AM Reply Like
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