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Five Dow Stocks With Rising Short Activity

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The most recent short interest data has just been released by the NASDAQ for the 03/13/2015 settlement date, and we here at Dividend Channel have sifted through this fresh data and screened out these five Dow Jones Industrial Average components. A metric we find particularly useful when comparing short interest data is the "days to cover" metric because it considers both the total shares short and the average daily volume of shares traded. For the five stocks below, we have detected a notable change in days to cover, not just from the prior reporting period but also going back a full month. The table below summarizes what we found, with the five columns showing data for each of the five stocks, and the rows showing the days to cover values first from the 02/13/2015 reporting period, then the most recent 03/13/2015 reporting period, followed by the change and percentage change:

DIS TRV V CAT JNJ
02/13/2015 3.76 4.04 4.50 3.80 2.34
03/13/2015 7.31 6.34 6.36 5.52 3.75
Change 3.54 2.30 1.85 1.72 1.42
% Change 94.26% 56.86% 41.11% 45.30% 60.61%

Click here to find out The 10 Most Shorted Stocks of the Dow »

At Walt Disney Co. (NYSE: DIS), average daily volume at the 03/13/2015 settlement saw a decrease to 5,986,728, as compared to 10,603,530 at the 02/13/2015 report. That brought days to cover up to 7.31, a 94.26% increase from the 3.76 days to cover calculated at the 02/13/2015 settlement date. Looking at total shares short, there was a 3,858,840 share increase to 43,735,228, a rise of 9.68% since 02/13/2015. The below chart shows the historical days to cover for DIS at previous short interest release dates:

Meanwhile at Travelers Companies Inc (TRV), average daily volume at the 03/13/2015 settlement moved lower to 1,574,962, as compared to 2,155,766 at the 02/13/2015 report. That brought days to cover up to 6.34, a 56.86% increase from the 4.04 days to cover calculated at the 02/13/2015 settlement date. Looking at total shares short, there was a 1,271,298 share increase to 9,981,578, an increase of 14.60% since 02/13/2015. The chart below shows the historical days to cover for TRV at previous short interest release dates:

Over at Visa Inc (NYSE: V), average daily volume at the 03/13/2015 settlement decreased to 2,526,938, as compared to 3,121,680 at the 02/13/2015 report. The resulting days to cover value was up to 6.36, a 41.11% increase from the 4.50 days to cover calculated at the 02/13/2015 settlement date. Looking at the running total of all outstanding shorted shares, there was a 2,000,954 share increase to 16,063,243, a 14.23% increase since 02/13/2015. The below chart plots the historical days to cover for V at prior short interest release dates over time:

At Caterpillar Inc. (NYSE: CAT), average daily volume at the 03/13/2015 settlement declined to 5,547,701, as compared to 6,932,653 at the 02/13/2015 report. The days to cover calculation moved up to 5.52, a 45.30% increase from the 3.80 days to cover calculated at the 02/13/2015 settlement date. Looking at the total of all open short positions, there was a 4,284,209 share increase to 30,614,822, a 16.27% rise since 02/13/2015. The chart below shows the days to cover over time for CAT at previous short interest release dates:

And at Johnson & Johnson (JNJ), average daily volume at the 03/13/2015 settlement decreased to 7,940,746, as compared to 11,166,083 at the 02/13/2015 report. That brought days to cover up to 3.75, a 60.61% increase from the 2.34 days to cover calculated at the 02/13/2015 settlement date. Looking at total shares short, there was a 3,711,675 share increase to 29,816,289, an increase of 14.22% since 02/13/2015. The following chart plots the historical days to cover for JNJ at previous short interest release dates over time:

An increased "days to cover" value could indicate that short sellers are using these stocks to hedge long bets elsewhere, or could also mean that short sellers believe the stocks will decline in price. When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. So investors tend to keep an eye on that days to cover metric, because a high value could predict a sharper price increase should a company put out some unexpectedly good news — short sellers might then rush to cover their positions, and if the days to cover number is high, it would then be more difficult to close those positions without sending a stock higher (until the higher price produces enough sellers to generate the necessary volume the short sellers need to close their positions).


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In afternoon trading Wednesday, DIS was off about 1.5% on the day, TRV was down about 1.1%, V was down about 1.5%, CAT was down about 0.6%, and JNJ was off about 0.9%.