Capstone (CPST) Shorts…more


Short interest is released only once per month. The NASD requires all brokerage firms to report to them the number of shares their customers are short for all stocks, they are required to provide this information on the 15th of each month. The NASD does not release the cumulative number of shares short until seven business days after the 15th (April data will not be known until April 26). So what good is the data you may ask? Looking at the chart (courtesy of RealTick www.realtick.com ) I have drawn in a crude scale of the amount of shares sold short. You can see that as of November 15 the total number of shares sold short and not covered stood at 6.4 million. The stock gapped higher (I believe on an enthusiastic mention from Cramer) and then a couple of days later Herb Greenburg had negative comments about the stock. The short position jumped dramatically from Nov 15 to Mar 15, it increased by nearly 8 million shares. The average price the stock traded from 11/15 to 3/15 was 3.63, this number is known as the VWAP (Volume Weighted Average Price). Of course we will never know the exact level the shorts got aggressive, but with the stock now breaking above the range of the last 5 months you can be sure that it hurts to be short. So how do the shorts stop the pain? Cut losses and that means buy back the stock. This buying (often forced by margin desks) increases the upward pressure on the stock and can lead to dramatic upside. It is quite possible that this is the beginning of such a squeeze in CPST. If you are long, hold on tight (with a stop, just in case..) for higher prices.