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  • Writer's pictureTed Ohashi

Short selling data gives cannabis investors optimism

This table was posted on the Internet by Ihor Dusaniwsky, Managing Director of Predictive Analytics. It shows the number of shares sold short on key cannabis stocks. By way of brief explanation, to invest and make a profit, you buy low, sell high. When it is done in that order it is called a long transaction. But in the stock market you can sell first and buy later. In that case, you hope to sell high and buy low. When it is done in that order it is called a short sale. When shorting, you hope the price of the stock will go down so you can buy it back at a lower price.

On the New York Stock Exchange, there are many professional investors using sophisticated investment strategies that involve short selling. In the case of the relatively new cannabis stocks, even the largest are under five years old as stock exchange listed companies, I believe that most short selling is done almost totally by investors who believe the shares are going to decline in price.

So what a large short interest tells me is that in general, investors believe the cannabis stocks are going to fall in price. As far as I’m concerned, this is a good thing. The only way cannabis stock prices can be low is if the majority of investors believe stock prices are going to go down. The reason cannabis stock prices are low is because investor psychology is negative. If it wasn’t, if investors were all optimistic, cannabis stock prices would be higher.

This data makes me even more optimistic about the cannabis group.

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