Short Sellers Are Backing Off These Names Amid Reversal Signals

Retail investors like to keep track of who is buying stocks lately, especially when it comes to the institutional side, as this is how a certain level of sentiment gauge is developed as to where capital is looking to head into and why. However, there is an opposite side to this equation that is as important as tracking where buyers are headed, if not more important, in figuring out where pivots and opportunities may be headed next.

This site represents the short-selling side, more specifically, the short interest levels of a given stock and company. Whenever short interest levels change significantly, whether to the upside or downside, there is typically good reasoning behind the shift, which can give investors a new view of what might happen next in these sectors or specific stocks.

Today, it looks like the bears have given up on trying to take down three specific names in the market, including retail stocks like Etsy Inc (NASDAQ:ETSY). and Celsius Holdings (NASDAQ:CELH) Inc., but also spreading out into another major asset class in the bond market as evidenced by the short interest shift within the iShares 20+ Year Treasury Bond (NASDAQ:TLT) ETF to give an even broader view of what might happen in the broader S&P 500 and economy.

1. Etsy’s Discount Cannot Be Ignored

Now that shares of Etsy have traded down to only 65% of their 52-week highs, investors have to face the fact that the risk-to-reward ratio greatly benefits the buyers here rather than the sellers today. Looking at this ratio drove some of the sellers away for now. Still, there are also some fundamental reasons behind this.

This low price for Etsy stock essentially represents the consensus belief that President Trump's recent trade tariffs will greatly affect this business, as its revenues rely heavily on shipping products to and from most of the countries that have been hit with the most tariffs in this new economic plan.

However, the uncertainty and intensity of these trade tariffs have somewhat ceased to affect stocks in the areas affected today, as some concessions have been reached. This renders most short ideas worthless in Etsy and other stocks, which might be why up to 9.2% of the company’s short interest declined over the past month alone, a clear sign of bearish capitulation.

2. New Sentiment Favors Celsius Stock Today

If investors found the discounts in Etsy attractive, then they will love the way Celsius stock is trading at the moment, going down to as little as 38% of its 52-week high levels to amplify the benefits that dip buyers can land for their portfolios in the coming months and quarters.

Understanding that Celsius has its logistics and supply chain set up mostly in the North American region, it makes fundamental sense to discount the potentially negative effects these trade tariffs might have had on the business. With this in mind, investors can look the other way into a potential buy thesis.

Weighing these scenarios took a toll on short seller morale, as up to 12.8% of Celsius stock’s short interest declined over the past month. This allowed new buyers to step in and replace the bears as they ran away from the scene. Investors can also get another round of confirmation from the recent shift in Wall Street analyst ratings for Celsius.

As of mid-April 2025, the UBS Group decided to reiterate their Buy rating on Celsius stock while also boosting their valuation targets to up to $48 per share. While this new view calls for up to 30% upside from where the stock has fallen to today, it is still only a fraction of the company’s 52-week high price of $98.8 per share.

3. Lower Rates Incoming?

Because bond prices move inversely to their yields, investors can get an even greater image of what might happen to the United States economy in the coming months and quarters based on what happens in the bond market.

Today, the prospect of the Federal Reserve (the Fed) cutting interest rates seems to have become somewhat of a consensus view, which is why some short sellers decided to leave this bond exchange-traded fund (ETF) recently. Over the past month, the ETF reported that 3.3% of its short interest has left the balance, though it is still left with a higher-than-usual 18.7% net short interest level.

When and if the Fed decides to cut interest rates, the high short interest in this bond ETF might trigger what’s known as a “short squeeze. A short squeeze occurs when a sudden up move in a stock causes short sellers to close their positions and cut losses, involving buying back shares and adding to the upward momentum.

As far as the S&P 500 and the economy are concerned, investors can expect this behavior and the potential lowering of interest rates to create a new bullish sentiment, pending the resolution of these trade tariff talks.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Written By: MarketBeat.com