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FX Street
Oct 12
Comment
Published at 00:20 (GMT) 12 Oct Extreme oversold daily technical tools squeezing weak shorts with prices staging rebound from last week's low of 3.3750 and target next resistance at 3.4140 and ability to clear the latter will expose stronger move...
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more ▼WIKI ANALYSIS
WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
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Weak shorts refers to investors that quickly exit a short position at the first hint of an increase in the stock price. Investors that short a stock expect the stock price to decrease; however, when this does not happen, weak shorts will be the first investors to exit their positions to avoid sustaining greater losses.
Example
- An investor shorts a stock at $10 with the expectation that the stock will go down. The next day, the stock trades upwards to $11 and the weak shorts exit their positions with a $1 loss. In ensuing days, the stock trades even higher and the weak shorts have successfully limited their losses.
- An investor shorts a stock at $10 with the expectation that the stock will go down. The next day, the stock trades upwards to $11 and the weak shorts exit their positions with a $1 loss. In ensuing days, the stock trades lower and reaches $9. In this case, the weak shorts have not had the patience to wait out their initial position and have sacrificed whatever gains they would have had on the position.
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