NKE's rising short positions historically signal negative returns after earnings announcements. Monitoring short position changes can provide predictive insights for post-earnings price movements.

We analyzed stocks reporting earnings, examining the last eight quarters for returns before and after announcements, along with changes in short positions.

The stocks reviewed include Lamb Weston Holdings, Inc. (LW), Northern Kentucky Corporation (NKC), and Paychex, Inc. (PAYX) before earnings on 10/1, as well as NIKE, Inc. (NKE) after earnings. On 10/2, Conagra Brands, Inc. (CAG) is reviewed before earnings, and Levi Strauss & Co. (LEVI) after. On 10/3, Constellation Brands, Inc. (STZ) is reviewed before earnings.

Our findings revealed that in the case of PAYX, the change in short position is zero, which limits its predictive value. In contrast, STZ shows a predictive relationship between short position changes and returns.

For NKE, an increase in short positions is associated with negative returns following earnings announcements. Although NKE recently rose by 11%, it historically tends to reverse after earnings.

In NKE the short position change is also predictive. When the short position goes up the stock usually goes down afterwards, which means the shorts are right.

Currently, the short position has increased by 6.1%, typically signaling a sell-off.

It’s important to note that the return signal and short position change are independent; there is no correlation between the stock return and the short position change in the week prior.

Historically, the short position in NKE tends to continue growing after earnings announcements

NKE generally experiences an average movement of 5% on earnings, with the options market pricing in a 6% move.

Overall, this analysis indicates that monitoring changes in short positions can provide valuable insights, particularly for NKE.

These predictive signals could be crucial for developing trading strategies around earnings announcements.

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