Steel Investors Are Most Bearish on These Stocks



Bearish steel investors

In the previous part of this series, we examined the key events that steel investors will be monitoring in June. In this final part of our series, we’ll discuss short positions in steel stocks (XME).

Remember, short interest tells us the number of shares that have been sold short. This data is released every two weeks. From short interest, we derive a ratio of days it would take investors to cover their short positions, or short interest divided by the average daily traded volume. This days-to-cover ratio helps us standardize short interest, as more liquid companies tend to have higher absolute short interest.

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Days to cover

According to the latest update on May 15, 2017, U.S. Steel’s (X) days-to-cover or short interest ratio stood at 0.93. This ratio has risen from the previous update, when U.S. Steel’s short interest ratio was 0.81 on April 28. Nucor (NUE) and Steel Dynamics (STLD) had a short interest ratios of 2.29 and 2.82, respectively, on May 15. AK Steel’s (AKS) short interest ratio was 2.29 on the same day.

ArcelorMittal (MT), the world’s largest steelmaker, has seen a steep increase in its short interest. The stock’s short interest ratio stood at 5.5 on May 15, as compared to 1.57 on April 28. Based on the most recent update, MT has the highest short interest ratio among the steel stocks that we’ve been covering in this series.

What can we infer?

It’s worth noting that while a higher short interest ratio indicates bearish sentiment, it could also trigger a short squeeze in the case of a positive news flow. Investors will recall that many bears were caught unaware in 1Q17, when rising steel prices triggered a steep rally in steel stocks.

You can read Market Realist’s series Analyzing the Steel Industry’s Demand-Supply Balance in 2Q17 to explore recent steel industry indicators.

You can also visit Market Realist’s Steel page for ongoing updates on this industry.


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