Wednesday, February 01, 2006

DRIV - Digital River

My scan of blogs turned up this particular stock, which announced better than expected earnings and positive guidance. The Bull Trader was the one who clued me in; he was not the originator of this info either; track his site to the source.

I wouldn't ordinarily write about something covered elsewhere, but this is a pretty interesting story, mainly due to the low float and high short interest. Short interest data is reported mid month. Turns out as of 1/10 the short interest was 7+ million shares on a 34 million float.

Looking in depth at the chart, you see pretty low trading volume in the timeframe between 1/10 and today. There's no guarantee of a short squeeze here (very, very good traders could have gotten out from under that position by now). A few interesting items of note here: 1) Price declines from 1/19 to 1/24, which would be virtually impossible if someone was buying like mad to get out from under a large short position, so probably no covering occurred here 2) Big spike in volume today seems to indicate a rush to cover at least a portion of that 7 million. Most of that volume came after 1:30pm.

The big question is how much is still out there and who's holding it.

The time to short might be at the peak if and when a squeeze does occur tomorrow. But I'll be watching the pre-market volume on this one as well. I turned a few nice trades in NFLX on a short squeeze recently; it would be great to start February with another one.


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