Lululemon AthleticaÂ Inc (LULU) shares short selling is increasing along with its stock price. Shares shorted has increased by 969k, +17%, in 2019 even as LULUâ€™s stock price is up 17% on the year. The trend continues as we are seeing continued short selling over the last week even as LULU breaks through the $140/level for the first time since November 2018. Shares shorted increased by 395k, +6.7%, as LULUâ€™s stock price rose by 4.6%.
The increased short selling is not due to shorts piling into a profitable trade, on the contrary shorts are down $117.3 million in mark-to-market losses in 2019 (-15.66%), including another -$6 million this morning. This follows several unprofitable years of short selling including 2018 when they were down $162 million in mark-to-market losses, or -29.73%; 2017 with $58 million in losses, or -11.61%; and 2016 when they were down $170 million, or 14.05%.
Continued short selling has not driven down Lululemonâ€™s stock price and if short selling subsides in the near future expect the continued long buying pressure to move LULUâ€™s stock price up higher and faster. Short sellers are looking for an overbought fallback in LULUâ€™s stock price, but we are not seeing buying demand weakening. It looks like the longs are running a marathon while the shorts were hoping for a sprint to tire them out.
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Managing Director Predictive Analytics, S3 Partners, LLC
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