Australia’s most shorted stocks, ASX 200 volatility and bull traps

We look at the 20 most shorted stocks on the ASX, recent market volatility and discuss what a bull trap is.

ASX 200: growth and volatility in focus

Though global indices traded bullishly for most of last week on news of government stimulus and aggressive central bank intervention – many key American, Asian Pacific and European markets closed out last Friday’s session lower.

Speaking to the Washington Post – Sarat Sethi from Douglas C. Lane & Associates – last week commented that:

‘We are experiencing a humanitarian crisis and a financial crisis at the same time, and that is being expressed through massive volatility in the markets.’

Volatile indeed! For example, while the ASX 200 rallied to an intraday high of 5,236 points during Friday’s morning session – the Aussie benchmark finished out the day at the 4,842 point level – 360 points or 6.9% off its intraday high.

Moreover, the ASX 200 VIX Index, which gives insight into market volatility and investor expectations, traded with extreme polarity during the week: On Monday the VIX plunged 17.09%, on Tuesday it skyrocketed 14.25% and then on Thursday it dove 11.98%.

On a more granular level, though the last month has proven to be broadly disastrous for some of Australia’s top growth names, last week proved much more accommodating.

On this front, Afterpay saw its share price almost double from Monday to Friday; EML Payments climbed 33%; PointsBet gained 35%; and short-side favourite WiseTech ran 31% higher.

Australia’s most shorted stocks

Interestingly, none of the growth names we just mentioned feature on Australia’s most shorted list; though APT’s short interest does stand at an elevated 4.84%.

Even so – using the publicly available data from the Australian Securities and Investments Commission – below we list the 20 most shorted stocks on the ASX:

Company

Share Price

Short Interest

Galaxy Resources

$0.790

18.07%

Speedcast International

$0.790

13.19%

Syrah Resources

$0.250

13.13%

Orocobre

$2.050

13.00%

Inghams Group

$3.290

11.14%

New Century Resources

$0.071

10.13%

JB HI FI

$24.290

9.66%

Pilbara Minerals

$0.165

9.50%

Metcash

$3.110

9.46%

Clinuvel Pharmaceuticals

$18.890

9.22%

GWA Group

$2.580

9.09%

Super Retail Group

$4.110

9.07%

Ooh!media

$0.605

8.47%

Bank of Queensland

$4.780

8.23%

Perpetual Limited

$22.690

8.03%

Pact Group

$1.490

7.92%

G8 Education

$0.635

7.91%

Corporate Travel Management

$8.170

7.71%

Bendigo and Adelaide Bank

$6.000

7.63%

Invocare

$9.980

7.62%

*The following list excludes News Corp Class A Non-Voting Common Stock-CDI 1:1.

So, are we in a bull trap?

Given the extreme levels of volatility we are now seeing across a variety of markets – many are worried that we are currently caught in a ‘bull trap’.

Broadly defined, according to Investopedia, a bull trap represents ‘a false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.’

Speaking of such rallies, research from Goldman has started making the rounds – with an ever-worrying global financial crisis comparison front and centre.

Here the preeminent investment bank pointed out that:

‘Between September and December 2008, the S&P 500 experienced six distinct 1-6 trading day bounces of 9% or more, with some rallies as large as 19%. However, the actual market bottom did not occur until March 2009.’

Indeed, while the ASX 200 this week dropped on both Monday and Friday; on Tuesday it rose 4.17%, on Wednesday it climbed 5.54% and on Thursday it bounced 2.30%. All up however, the benchmark finished the week up just 1.2%.

American markets look to be a different story: from Monday to Friday the Dow Jones Industrial Average soared 13% while the S&P 500 rose 10.93%.

Regardless of such facts, whether we have been ensnared in a bull trap, are back to a bull market proper, or just part of something else entirely, is a matter one cannot yet declare with much certainty. Just as the Danish philosopher Soren Kierkegaard lamented: ‘Life can only be understood backwards; but it must be lived forwards.’

The same applies to markets.

How to trade indices

What are your thoughts: will markets plunge again or can these rallies be sustained? Trade accordingly. You can trade indices such as the ASX 200 or individual equities such as Afterpay – long or short through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) the ASX 200 using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘ASX 200’ or ‘Australia 200' in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

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