Shorting stocks can be a dangerous game. Investors should remember that shorting isn’t just the reverse of buying stocks.
The long-term bias of the stock market is for stocks to rise. Thus, if you are shorting a stock, you are betting on a decline due to some short-term factors that you believe will drive it down (such as an earnings miss or bad publicity), or a long-term bet that the company is under pressure and will be for some time to come.
Personally, I rarely short stocks. I only do so if I believe some bad news is coming down the pike for a company or industry, or if I believe a business is truly unsustainable and not a momentum stock.
As for these stocks in the Nasdaq 100, I don’t entirely see the logic behind the high short interest, which may mean it’s a contrarian indicator. In that case, the high short interest may find itself stuck in a short squeeze.