Schlumberger’s Cues: Reading the Short Interest
Short interest in Schlumberger
On March 10, 2017, short interest in Schlumberger (SLB) stock as a percentage of float was at ~1.0%, which represents a fall of 16% from its level of 1.2% on December 30, 2016, or since the end of 4Q16. As the graph below shows, SLB’s stock price and short interest as a percentage of float have been inversely related in the past two years.
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Short interest and stock price
Short interest refers to the number of a company’s shares sold short, divided by the number of shares outstanding. A fall in short interest as a percentage of float, or a fall in short interest, indicates that fewer investors expect the stock’s price to fall. SLB’s stock price has fallen 6% since December 30, 2016, despite the fall in short interest.
Notably, Schlumberger makes up 7.5% of the iShares US Energy ETF (IYE). The Oil & Gas Equipment & Services industry makes up 15.7% of IYE. For more on SLB’s outlook, check out Market Realist’s series Stumbling Blocks Could Be on the Horizon for Schlumberger.
A note on share prices and short interest
Investors should note that the market could go against investors’ sentiment. A share price can also increase when investors start buying a stock to cover their short positions.
At the same time, energy stocks are typically correlated with the price of crude oil. Continue to the next part of this series for a key look at SLB’s correlation with crude.