Human Psychology In Real Time

by Greg Rieben

I love the markets, investing and trading for many different reasons but what I love the most is being able to watch human psychology play out in real time.

Tesla has brought together a wide assortment of participants from long term investors (the true believers), short selling hedge fund managers, celebrities, market technicians, fundamental analysts, professional traders, amateurs, those who suffer from FOMO as well as those who think Tesla is the alternative to big oil.

Opinions and stories aside this isn't the first time Tesla's stock has made a parabolic move higher.

In 2013 after trading in a range/base for over two and a half years, Tesla broke out and shares blasted higher moving from $40 to over $190 in six months. That's a move of over 375%.

The more recent break out occurred around $400/share and topped out this week at $968.99. A move of around 140%. However, the stock has only been outside of the trading range for a month and a half.

On Thursday Tesla closed at $748 and has given the bulls some cause for concern. Stay tuned as this story is far from over as the bulls and bears battle it out.

Stocks With a Large "Short Interest" are Becoming Popular

Thanks to the Tesla story many investors, new and experienced, are becoming a lot more familiar with stocks that have a large short interest (number of shares sold short but have not been covered or closed out).

The hope for those long a stock with a large number of shares sold short, is that the short-sellers will eventually have to buy back those shares driving the stock price higher.

There are many reasons for short sellers to target a stock, such as the company is struggling to generate a profit and has legitimate issues with it's current revenue model. Just like buyers of a stock they are sometimes right and sometimes wrong in their analysis and reasons for their position. 

However, in some instances if a stock is starting to trend higher and the fundamentals improving, the amount of shares sold short could be another catalyst that might work in your favor if you're long or looking to get long the stock.

Below are a few stocks with a short float over 30% that have consistently moved higher for more than a year.

Don't Overthink a Bull Market

It's not bearish when:

  • The NASDAQ, S&P 500 & DJIA make new all time highs
  • Mega Caps AMZN, GOOGL, AAPL & MSFT trade at or near all time highs
  • The US Financial Sector is trading right near the 2007 highs and is threatening to break out
  • Technology stocks (software and semiconductors) are the leading sectors
  • Stocks continue to rally despite negative headlines and news

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