Re: [CANSLIM] Outstanding Shares Sold Short

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Outstanding Shares Sold Short
Date: Fri, 29 Aug 2003 13:24:59 EDT

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Kelly & Tomas,

     I've been on vacation, so I am a little backed up on my CANSLIM reading. 
 

     1) The way I analyze short squeezes:  I get the short interest (from 
DGO).  This tells you how many days-using ADV-are needed for the stock to be 
covered.  

     2) I then look at the ADV (average daily volume); 3) Finally, I look at 
the Float (the amount of shares outstanding minus those owned by high 
management, such as the directors).
    
     4) I then calculate (the short interest * ADV)  divided by the Float.  
The resulting total should be the amount of the short squeeze.  For instance, 
KDE at one time had a humongouse short interest (approx. 12) and a high ADV 
(approx 150,000).  It also had only about a 6million share float.  Putting the 
numbers together gives you a 50% POTENTIAL short squeeze 
[(20*150,000)/6,000,000=50%].  This occurred at Christmas time when the dolls they made were the 
thing to get for your kids.  

     The upshot:  KDE, a low priced stock shot up (probably for CANSLIM 
reasons [ie. it rose above a pivot point].  But what really gave it impetus was the 
short squeeze.  Those who were holding it short bought it back-so they 
wouldn't lose anymore money.  KDE went on to rise about 70 points in some 3 or 4 
months ( This happened during the Christmas season  about 4 years ago).

     I believe that when the 2nd bull leg begins (perhaps in November/03), 
many CANSLIM stocks of the first leg will have high short interests and high ADV 
and low float (because their valuations are high, eg. CANSLIM stocks have 
high PE and many are small caps).  The Market correction will induce many to 
short these stocks; then when the Market revves up again and the high PE stocks 
have made their 2nd stage base, the pessimists will be caught short, and will 
have to buy to cover.


jans

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