Which ASX stocks are investors covering and shorting? — Week 32

Welcome back to the Short Seller Series, where we recap the most shorted stocks on the ASX, along with those experiencing a notable rise and fall in short interest over the past week. 

Short selling data is four days behind today's date because reporting is not mandatory until three business days after the trade. The table below compares short interest changes between 26 July and 2 August.

Most shorted stocks

What’s changed

• Core Lithium is the most shorted stock for a second consecutive week

• Flight Centre short interest is close to two-year lows

• Pilbara Minerals jumps to #7 from #13 a week ago

• AMA Group falls to #11 from #6 a week ago

Where are shorts covering? 

Key themes

Stocks that experience the largest week-on-week decline in short interest tend to follow one of two themes:

1. Its been battered but starting to bounce: Shorts are exiting as a) the trade is beginning to head in the wrong direction and b) they still have plenty of profits left to take – This is the case for names like Downer, Domino’s and GUD.

2. Its been battered and continues to be dumped: Shorts are exiting as the stock falls to extremely oversold levels – This is the case for Dubber, Terracom.

Where are shorters going?

Pilbara Minerals: a little squeeze

Pilbara Minerals has seen short interest rise dramatically over the past couple of months:

• 1-month ago: 6.2%

• 3-months ago: 5.6%

• 12-months ago: 1.8%

Here are a few reasons as to why investors are bearish on lithium:

• Lithium prices continued to unwind after a brief bounce earlier this year. Chinese lithium prices fell below 265,000 a tonne at the start of August, the lowest in over two months.

• Lithium miners are guiding to lower earnings amid the pullback in prices. The US-listed Albemarle said “as prices decline, we are realising lower lithium prices faster than lower spodumene costs, and we expect the majority of this impact is going to recur in the third quarter.”

• Tesla’s China-made EV sales fell 31% month-on-month in July, according to the China Passenger Car Association (CPCA).

On Monday, Pilbara Minerals upgraded its resource estimate by 36% to 414mt at grades of 1.15%. The stock finished the session up 4.9% and rallied another 2.7% the next day – Leaving it just 6% off all-time highs. These gains might be exacerbated by potential short covering, which we’ll see next week.