Why Short Selling Can Be Viewed as Bullish
Traders bearish on tech stocks often employ a short selling strategy and hope the stock subsequently declines in value, thereby profiting off of the difference between the initial shorted price and the lower price at which the short trader hopefully buys back the stock.
While some argue that stocks with large short positions are bearish, I would counter that by saying heavy short selling means there’s an opportunity to make money on the stock. When a shorted stock with heavy short selling begins to rise in value, you will likely see a big influx of short sellers moving back into the market and buying back the shorted stock to replace the initial position. If enough short sellers do this, a short squeeze would likely materialize, helping to drive up the price of the stock in the market. So while stocks with heavy short exposure are viewed as bearish by many, I often take the contrarian view and look at these heavy short stocks as long opportunities to make some quick money.