This analysis examines short interest in OEX 100 stocks before earnings, revealing a pattern of increasing short positions prior to significant price declines. In 60% of cases with a 10% drop, short interest grew by nearly 5% the week before. Tracking short interest could help investors anticipate moves.

Using 2 years of data for the OEX 100 stocks we isolated downward moves of over 10%. We looked at the short position the week and month prior.

In a normal case we would see in some cases the short position would grow, some it would shrink and in some cases remain constant, with these happening equally.

But in these cases we found that in 60% of the time the short position grew the week before, by an average and median of 4.8%

We can say that in these cases the shorts knew and signaled the upcoming sell-off. In many cases (40%) there is no warning from the shorts.

This analysis does not show the times that the short position grew and nothing significant happened, which is the majority of time.

It turns out for these names the 10% moves happen almost always or exclusively on earnings.

Here are two cases which are earnings blow ups, CRM and TGT, the pattern is the same. Investors should notice short interest positions increasing before earnings. In one case the stock is at a low and one at a high but it’s the same pattern.

The USB was not an earnings problem, but the shorts still signaled and sold on the way down.

These stocks report soon and have a 5% change in the short interest. The market cap and the options expected move are also shown.

Overall, this analysis emphasizes the importance of short interest as a potential indicator of upcoming price movements, particularly around earnings announcements. Investors may benefit from integrating short interest data into their trading strategies, especially for stocks with imminent earnings reports.

Monitoring short interest before earnings announcements can provide useful insights. Stocks with growing short positions ahead of earnings may experience notable price drops. Investors should consider incorporating this data into their strategies.

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