Cliffs Natural Shares Are Hot Hot Hot For Shorts, And So Are These Other 5

Astec Analytics is a provider of timely and accurate intra-day short-selling data and information, which helps investors better understand changes in investor sentiment.

This week's report includes a few of the same companies that were highlighted in the prior report along with new entrants.

Top Pick: Cliffs Natural Resources

Given the more than 500 percent surge in Cliffs Natural Resources Inc CLF, the stock attracts the attention of short sellers, especially after last week's 27 percent gains.

Dating back to June 2016, around 20 percent (approximately 55 million shares) of Cliffs' stock was being borrowed. However, as of the end of last week, the amount of shares being borrowed was less than 8 million.

While there may be signs of recovery in the U.S. rust belt which bodes well for iron companies like Cliffs, it is still important to keep the stock's price in context as it was trading north of $70 per share five years ago versus a 52-week low of just $1.72.

1. Crane

Short sellers have been riding both the highs and lows of Crane Co. CR over the past year. Short interest did peak in August but then fell sharply — only to rise once again toward the end of 2016. Meanwhile, short sellers remain confident that the current stock level cannot be sustained over the longer term.

2. Under Armour

Holding on to the number two spot from last week, Under Armour Inc UA UAA has seen its stock close last week up $21.60. However, short interest has fallen by 8 percent as of late but this doesn't translate to a bullish indication for the stock.

Granted, the volume of short interest fell around 8 percent, the number of shares short as a percentage of the available supply actually rose 8 percent.

Short sellers remain optimistic that further gains can be made in the stock which could fall even further.

3. Tesla

Tesla Inc TSLA is the ultimate example of a bull versus bear story and as such the automaker isn't a stranger to the hottest short list.

Short interest levels hit an all-time high in the week before last but the stock keeps on moving higher amid high expectations for the Model 3 sedan and the company's expansion into India. However, short interest began to fall last week and moved down around 8 percent by volume.

Related Link: 6 Hot Stocks Among Shorts: IBM, Exxon Mobil And More

While an 8 percent decline isn't necessarily huge it does mark the single largest decline since October of 2016 and could indicate that short sellers have "thrown in the towel" and accepting losses on their short position.

4. Globalstar

Globalstar, Inc. GSAT, a wireless communications provider, makes its debut in the hot short list.

Back in December of last year the stock soared over 100 percent to $1.58 and closed last week at $1.35. Meanwhile, over the past 12 months, short sellers have "kept a steady but slow level of increase."

On Tuesday, the number of shares borrowed has reached its maximum, which indicates short sellers are expecting a decline in the stock on top of the already year-to-date fall of around 8 percent.

5. Cara Therapeutics

Finally, making the hot short list is Cara Therapeutics Inc CARA, a clinical stage biopharmaceutical company that specializes in pain relief.

Until last September the short interest in the stock has been "very slowly increasing" from a low base. At the start of 2017 short interest volume rose 36 percent and drove utilization above 95 percent.

Short sellers have been piling into the stock under the assumption that the stocks' strong surge cannot be sustained over the longer term.

by Jayson Derrick

Source: https://www.benzinga.com/news/17/02/9044198/cliffs-natural-shares-are-hot-hot-hot-for-shorts-and-so-are-these-other-5

A Safer Way To Short Stocks

  PTLA M LL

Most investors don’t like to short stocks because shorting carries unlimited risk. This recently played out in a very bad way after a person shorted KaloBios Pharma only to see the stock move from $2 to $18 in after-hours as another investor bought a high percentage of the float.

Before You Short This doesn’t happen all the time, but it is not advisable to short low float stocks with a large percentage of your portfolio. The question becomes what is a good opportunity to short a stock?

If you are looking at a long term prospect, be sure you understand what the costs involved in the borrow are. Brokerages will charge a rate of interest based on the demand for shorting shares, we call that the borrow. The more people want to short a stock, the higher the borrow rate will be. This will eat into the total return of your investment, so makes sure you aware of the rate.

It might also be wise to look into buying a put instead of shorting the stock. The put will give the exposure you are looking for, but it will eliminate the unlimited risk. The put can only go down 100%, so you won’t have to pay $18 for a put that cost you $2… but you might be able to sell it for $18.

Shorting stocks or looking for downside is every bit as difficult as finding a stock that looks to be going up. In fact, there is a saying on Wall Street that stresses that it might even be more difficult than being long. They say “shorts do the most homework” which implies that they are deeper into the story behind the stocks than the longs. This is mostly true, and a great example of this is Whitney Tilson’s short of Lumber Liquidators (LL - Snapshot Report). He tested products for poisonous fumes, and I highly doubt those long the stock did the same thing.

The Secondary

One strategy for shorting stocks in a small time horizon, is playing the secondary offering. A company will hold a secondary offering to raise some capital or allow large investors to exit their positions. In most secondary’s, the company will announce the offering, then through investment banks they will gauge interest from the market. The bulk sale of stock is almost always done at a discount to the market price.

That discount is what gives shorts a good opportunity to make some quick gains. The longer term short thesis also benefits from the secondary offering when the company sells shares to raise capital for itself. This increases dilution and lowers earnings per share.

Leverage The Zacks Rank

Recent FilingsThe Zacks Rank looks at the change in earnings estimates, which many fundamental investors believe drive stock prices. When looking to short a stock that is holding a secondary offering, your best bet is to look for a stock with a low Zacks Rank of #4 (Sell) or #5 (Strong Sell).

Just because a stock is doing a secondary offering should not make it an “automatic” short. Take the case of the very recent secondary offering from Portola Pharma (PTLA - Snapshot Report). The company announced a mix securities shelf offering when they reported earnings on November 9.

After the close on December 3, the company announced the offering size of 2.6M shares and that it would price before the open the next morning. Demand for this offering was significant and the deal was upsized to 3.125M shares and was priced at $48.00, a discount of $1.38 from the previous close or about 2.8%.

Here is a graph of the stock from just before the offering to Friday afternoon following the pricing:

From this chart, it looks like savvy investors were building short positions around $50, and once they acquired enough shares the stock broke higher and the deal was priced. Sometimes an investor will short a large amount of the stock and fill the short with the shares they receive from the deal.

Portola Pharma (PTLA - Snapshot Report) is a Zacks Rank #2 (Buy) stock, so clearly this one would not be on the list of ideas to short as earnings estimates have been increasing.

A Potential Play

Macys (M - Analyst Report) is a Zacks Rank #4 (Sell) and they filed a mixed securities shelf offering on December 1. Today the stock was downgraded to Neutral from Buy at Goldman Sachs.

The deal size is not known and the pricing will happen after we know the size. Shares of this stock could be under pressure over the next several sessions.

I should also note that Kalobios Pharam also filed a secondary, raising $8.2M in a private placement of 280,170 shares. That means that deal when off around $29. Of course, this is not a stock I would want to be short given the small float and general volatility it has exhibited lately.

by Brian Bolan

- Source: http://www.zacks.com/commentary/64081/a-safer-way-to-short-stocks#sthash.0iio97my.dpuf

How To Set Up Your Trading Screens

Modern markets have evolved into vastly complicated organisms with thousands of data points competing for attention. It’s our job to transform this information flood into an efficient set of charts, tickers, indices and indicators that support our profit objectives. Part of this task requires observation of broad market forces, while the balance demands a narrow focus on specific securities used to execute our strategies.

Most traders have real-life jobs and responsibilities away from home, forcing them to access the markets through pint-sized smartphones, gathering the information needed to assume new risk and manage open positions to a profitable or unprofitable conclusion. These folks will benefit with the screen saving tips I’ve outlined in Top Strategies Remote Traders Should Follow.

A fortunate minority sits at home or in a proprietary shop and trades full time. These folks need more detailed on-screen information because they’re assuming greater risk. The additional data covers the same territory as the remote participant but in far greater detail. In addition, they need to set aside space for incubation of future opportunities, with a focus on market groups not currently being traded.

How many monitors do at-home traders need to watch the markets efficiently? The answer has changed over the years because monitor prices have dropped substantially while graphics cards now routinely support multiple monitor setups. Given the low cost, it makes sense to add as many monitors as you can fit comfortably in the space set aside for the function, while not exceeding your budget or your ability to promptly analyze the information you put on them.

Building Effective Trading Screens

Generally speaking, traders do a poor job capturing the three types of information needed to support a comprehensive visual analysis: market observation, position management and incubator. Each square inch of screen space wasted with unnecessary charts or data contributes to an incomplete view that can be costly in an active trading style. Nearly all traders have made the most common mistake at some point in the careers, i.e. loading up screens with too many charts and not enough tickers.

Reserve charting for must-watch tickers, with a second group set to different time frames that link to a single symbol from the watch list. If space is limited, add a time frame toolbar to fewer charts and flip through different settings on that chart. Specific time frames utilized for this analysis should match your market approach. While not set in stone, the following settings offer a good starting point:

• Scalpers: 5-minute, 15-minute and hourly charts.
• Swing Traders: 15-minute, hourly and daily charts
• Market Timers: hourly, daily and weekly charts or daily, weekly and monthly charts

Must-have charts may include the following:

• SP-500 futures or SPDR S&P 500 Trust (SPY) set to 15-minute time frame
• Nasdaq-100 Futures or Powershares QQQ Trust (QQQ) set to 15-minute time frame
• S&P Volatility Index (VIX) set to 15-minute time frame
• 24-hour 15-minute charts of market moving securities, like Apple (AAPL), SPDR Gold Shares (GLD) and US Oil Fund (USO).

If possible, keep two sets of SP-500 charts, one for the U.S.-only session, starting at 9:30 am ET and ending at 4:15 pm ET, and a second 24-hour 60-minute futures chart that tracks overnight action in Asia and Europe (see Interpreting Overnight Action In The Index Futures). This second chart is enormously useful in getting up to speed when you open your workstation in the morning.

Sample SetupsWhat about a real-time news ticker? This is a personal choice because some strategies rely on breaking news to execute positions, while the majority works perfectly well with a stand-alone third party service or a carefully curated Twitter stream. As a general rule, its best to keep news off your charting and data programs, saving the precious space for charts and security tickers.

These images capture highlight methods to use screen space efficiently, regardless of the number of monitors used to watch the financial markets. The panels in these examples scale well when adding new screens, or when loading up a small laptop for travel. When pressed for space, reduce the number of charts and securities while keeping the entire set of indices and indicators.

The only

The top panel (1) highlights major benchmarks, showing detailed information on the Dow Industrial Average, SP-500, Russell-2000 and Nasdaq indices. SP-500 and Nasdaq-100 futures contracts sit at eye level so traders can watch in real time during the market day. Open, high, low and last data columns reveal how current price is interacting with key levels, which also mark intraday support and resistance.

The center left panel (2) deconstructs the Level 2 market depth screen, eliminating extraneous columns in favor of a streamlined view that displays just price and size. Market center data is no longer useful because the vast majority of intraday transactions never make it to this screen, due to lightning fast high speed trading algorithms (HFT). The time and sales ticker on the right side has been reduced to core elements as well, showing just time, price and size.