I'm just making sure I have this correct, let me know, thanks! Short ratio: Good for predicting how severe a squeeze may be, but not always informative about overall investor sentiment because it is affected by trading volume. Short % of float: May be minimally helpful in predicting a squeeze, but mostly a good predictor of investor sentiment. So if I just want to know how investors are tending to think about a stock, and I have both numbers, I should pay much more attention to % of float.
Yep I think you are right. The short ratio is affected by volume because it is the number of days it would take to cover all short positions based on some average volume. So yeah, it is hard to get a feeling for that number. Therefore % short seems more intuitive.
Thanks! I was 99% sure, but so many people seem to rely solely on Short Ratio that I started to question myself...
Over the years I've heard people who are long crappy stocks with high short interest try to justify their position by believing there will be a short covering rally coming very soon. In my opinion there are certainly better stocks to long on out of the thousands available. In my experience, the short ratio or short interest is more important when looking to go short. Generally I don't want to short when a stock has high short interest as the trade is just too crowded. The exception would be when short interest gets up to say 20% or more. For those, the big professional shorts are probably involved and most likely they will be proven correct.
