SHORT STACK: What the Australian market is betting against this week

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Our latest look at the short side of the market – the side where the bears lurk and traders believe they know which stocks are going to fall – reveals some interesting moves this week.

Most notable is the big uptick in short selling in the stock of the Bank of Queensland and Qantas. Both companies appear to again be assailed by competitive forces and margin pressure.

The shorts in gold miner St Barbara might be feeling the pinch though after increasing their positions only to see the company’s share price leap in Monday’s surge in Australian gold miners.

On the other side of the ledger, it was the reality of a fall which saw Sirtex as the biggest reduction in short positions over the week. But perhaps it was Bluescope Steel’s unrelenting rally that led to shorts in its shares being reduced by around a quarter.

Here are the top 10 stocks by percentage decrease and increase in short positions.

Source: IG, ASX

Stocks of the week.

Bank of Queensland (BOQ): Angus Nicholson, analyst at IG Markets, told business Insider that BOQ “did not have a good week last week losing 5.4%”. Whether a cause or effect, Nicholson said the fall in the stock price was accompanied by BOQ experiencing “the biggest weekly increase in short positions of any stock in the index”.

He says the weakness could have been precipitated by a Goldman report last week in which the firm “lowered their rating on BOQ from Buy to Neutral”. That was associated with Goldman also calling for another two RBA rate cuts in August and November which will “impact the net interest margin of Australian banks”.

Crucially though for BOQ, Nicholson said, is the market’s view that “these margin declines are set to hit Australian regional banks the hardest”.

BOQ daily (IG)

Premier Investments: Sirtex didn’t have its best week ever last week after updating the market which “saw them lower their full year dose sales growth to 15-17%, below their previously projected 18-20% growth rate,” according to Nicholson.

“While they still expect North American sales to grow at 18-20%, EMEA and APAC growth is set to drag on their previous forecast.”

That left Sirtex’s stock down 8.1% on the week and “plenty of short positions that had accumulated throughout May looked happy to close out around the A$29.00 level.”

But the selling hasn’t stopped with Sirtex at $28.63 this morning and Nicholson noted that “even after a big decline in in short interest, a number of investors are still holding onto open short positions looking for a drop to A$27.00”.

You can follow Angus on Twitter: @ANicholson_IG

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