CHICAGO, Oct. 12, 2011 /PRNewswire/ -- Stocks in this
week's article include: BJ's Restaurants, Inc. (NASDAQ:
BJRI), Cogent Communications Group, Inc. (NASDAQ: CCOI),
Forward Air Corp. (NASDAQ: FWRD), Hibbett Sports,
Inc. (NASDAQ: HIBB) and Primoris Services Corp. (NASDAQ:
PRIM). Kevin Matras examines the
'short ratio' as a market sentiment indicator and shows how to use
it for finding winning stocks.
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Screen of the Week written by Kevin
Matras of Zacks Investment Research:
This week's Screen looks at a market sentiment indicator called
the 'short ratio' to find new stock picks.
The short ratio is the number of shares sold short (short
interest or bets that the stock will go lower in price) divided by
the average daily volume. This is sometimes referred to as the
"days to cover" ratio because it tells approximately how many days
it will take short-sellers to cover their positions if good news
sends the price higher.
The higher the ratio, the longer it would take to buy back the
'sold' (borrowed) shares. And in theory, the more short positions
there are to cover, the stronger the short covering rally would
be.
Many people who use this indicator like for the number of "days
to cover" to be higher than 8-10 days. It's generally believed that
a short ratio of that size could prove difficult to cover and
therefore trigger a strong rally on any hint of an upswing. (My
personal preference is to take that into consideration, but also
compare it to the industry's average ratio and the stock's own
historical ratio.)
And while I wouldn't recommend using just the short ratio as the
'be all and end all' of screening items, I do think it can be a
great tool for helping define great opportunities.
The parameters to this week's screen are:
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Investment Research may own or have sold short securities and/or
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have sold short securities and/or hold long and/or short positions
in options that are mentioned in this material.
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