Futures are sharply higher based upon a variety of factors, namely retail sales. But Europe was trading up before our retail sales, so it’s worth noting risk appetite is alive and well. To reiterate the point from my previous post, stocks burdened by heavy short positions will benefit the most in a market like this. There are two reasons why this is true.
1. Short sellers provide liquidity and a bid in stocks due to covering.
2. When short sellers and natural buyers converge on a stock at the same time the results can be explosive, sending a stock up much more than other “non-shorted” stocks.
However, one must understand there is a reason why certain companies are heavily shorted. More often than not, short sellers have done their homework and will end up being correct on stocks they bet against. Case in point: Chinese burrito stocks. I tend to look at most stocks, especially heavily shorted ones, as short term trades. If I can make 10-20%, in a short period of time, on a shorted stock, I am more than obliged to take profits. For the love of rabid dogs, I am eager.
Last week I re-purchased RS and FORM, two old positions of mine. It appears RS guided up this morning, always a good thing. Plus, another one of my positions, JWN, caught an upgrade this morning. With Dow futures +80, I find myself 110% long into a decent rally. I need to make some headway here, after underperforming the rest of you cow-fuckers for the past month. So I will make my coin here and outstrip the rest. The next set of moves will be to lighten up on my longs and prepare for a bastard of a summer.