Regional banks sold off sharply after Zions and Western Alliance disclosed unexpected loan losses and fraud probes, sending KRE down 6% and reigniting credit stress fears across the sector.

Short Interest Positioning

Earlier cycle (Q1–Q2 2025): Shorts expanded sharply as KRE fell from $68 → $48, showing that short sellers pressed into weakness during the first half of the year.

Recent Trend: Notional short interest has been rising gradually since June, even as KRE’s price drifted sideways, signaling renewed bearish positioning ahead of fresh sector stress.

• Breakdown confirmed: KRE closed at $58.14, decisively below both the 50DMA ($63.44) and 200DMA ($60.01) on 70.6M shares, more than 3× average volume, confirming a high-conviction breakdown.

• Momentum deterioration: The MACD (-0.82 vs -0.49 signal) deepened its negative crossover, reflecting accelerating downside momentum and renewed selling pressure.

• Trend structure: The sharp breach of long-term support shifts the bias to lower highs and lower lows, indicating a potential transition from consolidation to a more sustained downtrend.

Source: Bloomberg

Top 30 Regional Bank Shorts by % Float (min. $100M notional)

Note: The latest Exchange Reported Short Interest figures are as of settle date 9/30, trade date 9/29, approximately 3 weeks ago.

*S3 Partners is the only source for real-time short interest analytics

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