How Short Interest Can Create “Extra” Demand For a Rising Stock

08/12/2008 12:00 am EST


Brian Shannon, CMT


When someone bets against a stock by selling short they make money if the stock goes down. If instead, the stock rises, the short seller will find himself in a losing position and will have to repurchase shares to reduce or eliminate losses. On Wednesday, I outlined the potential for a short squeeze in shares of China based Mindray Medical (MR). The thinking was that with a rising share price and a float in a losing position the shorts may panic. So far it looks like they are as the stock was up over 10% on the day.

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