Shorting in Times Like These

This market has become increasingly concerning for us to short in. Stock are getting hammered day by day, and the ability to find stocks worth shorting is not the problem, you can pretty much short anything and you will make money (unless they are ETF’s like SKF & QID of course.). The real problem lies with trying to find shares to borrow from the broker as they are becoming depleted of their reserves.

For instance, we use Think or Swim to as our brokerage, and they have started running into trouble finding shares of giants like MSFT, AAPL, GOOG, among others. Now, I’m sure that there are brokerages that have these shares available to short, but it nonetheless, raises the red flag. Hits on Shareplanner are coming from people typing in such phrases as “how to short” and “day trading short picks”. This makes me think that too much of the crowd are starting to short stocks, which makes me very nervous.

What I believe that we might be seeing here is the potential for a large rally to the upside eventually, regardless if it is legitimate or not and even if it lasts for a day or two. In fact, to really reload on my short positions, I think we absolutely have to have a major rally of sorts to get the crowd panicked, squeezed, and out of their positions – making them think twice about shorting a stock ever again. Today the futures are pointing down again, and we’re likely to see further weakness, but unless it is scalping stocks on an intraday basis, holding them overnight is somewhat risky at this point.

However, if you are still looking at a stock for shorting, check out FINL – there’s shares available and has a nice setup to it. I posted a chart on this back on Friday – take a look.