Oct 14 (Businesshala) – Wall Street’s highly short stocks were halted on Wednesday as institutional investors pared their short bets on a strong rebound in risk sentiment, strategists at Wanda Research said in a note.
US shares rose more than 1% on Thursday, based on gains from the previous session, led by big growth names like Amazon.com and Microsoft.
“We believe that institutional investors were forced to cover their shorts, either because they were de-grossing or because they feared a rebound in risk sentiment could inflict pain on their short book. ,” said Wanda strategists Ben Onatibia and Giacomo Pierantoni.
Nikola Corp., Workhorse Group Inc., Qualtrics International and Canu Inn — among the highest short-interest stocks as a percentage of free float — have rallied between 8% and 11% this week, according to data from S3 Partners.
Extremely short names on Reddit’s Wallstreetbets received higher retail mentions, strategists said, noting that comments on such stocks on the platform were very close to the daily average in September and October.
However, retail investors had nothing to do with the short squeeze, strategists said, as individual buying of these stocks on Wednesday was much lower than for most of September and October.
Short-sellers are bearish investors who borrow an asset in the hope that they can buy it back when the price falls, to cover the debt and pocket the difference.
As a short-covering move, investors scramble to buy shares they bet would decline in light of positive developments. (Reporting by Medha Singh in Bengaluru; Editing by Uttaresh. V)