Special Feature
Take Home Retail Group in the graph below, as an example. On the face of it, there looks to be a good ‘visual correlation’ between stock loan % increase and price decrease. It may well be that the stock is on loan for shorting purposes. If you visit our website and look at the graph over a 3 month period, you will notice that price is levelling out, but in the last 6 weeks the stock loan % has increased by an additional 5% to the current level. This is an interesting situation. If the stock has been loaned but not yet shorted into the market, then there is plenty of gunpowder hanging around waiting to be fired. If it has been shorted into the market then the market is holding up fairly well - especially given the current market conditions. This is the type of share I personally would add to my watch list and would wait for the market to give further signals as to whether to go long - for example a reduction in the short position with a rising price would be a lead indicator that sentiment may be changing and a trend change imminent. Carpetright has a similar 3 month profile - i.e. increasing stock loan % but a flattish price - check it out on our website.
Figure 1 - Home Retail Group - Price, Stock Loan %, Volume
94 | www.financial-spread-betting.com | July 2012