MSFT & META Short Positions Signal Potential Moves Ahead of Earnings Reports

Short interest in Microsoft (MSFT) and Meta Platforms (META) shows predictive patterns ahead of earnings, with divergent trends potentially signaling contrasting moves post-report. META’s short interest increase suggests possible declines, while MSFT’s rising short interest aligns historically with gains.

MSFT and META are scheduled to report earnings tomorrow.

MSFT is pricing in a 4% move, while META is anticipating an 8% move, which aligns with their typical performance.

For both MSFT and META, changes in short positions in the week leading up to earnings are predictive. In META, if the short position increases, the stock usually declines; conversely, the shorts get it right. In MSFT if the short position increases, the stock usually rallies, the shorts are wrong.

META is significantly more volatile than MSFT, so applying the same principle, changes in short positions have historically preceded larger moves in META than in MSFT.

Beyond short positions, stock price influences also play a role.

In the case of MSFT, the downward expectation stems primarily from a 4% decrease in short positions; The stock's minimal movement—essentially zero—renders this factor less impactful.

For META, the short position has increased by 4%, which historically indicates a negative trend. The stock is currently down 2% and shows momentum, amplifying the sensitivity to the increase in short positions.

On average, META moves up 3.5% (±16%) the day after earnings, while MSFT typically experiences a 4.5% move, though this has been less consistent recently. The expected downward move for META is considerably larger than the anticipated upward move for MSFT.

The short position for MSFT has been rising after a decline since September 12. Meanwhile, META’s short position has been increasing for two weeks. The last time it fell right before earnings, the stock rallied, consistent with historical patterns.

MSFT Short Position Growing

Pre-earnings short interest shifts in MSFT and META suggest notable moves may follow earnings, guiding traders on possible short-term outcomes.

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