Weak shorts refers to the group of investors who hold a short position and are quick to exit their positions at the first sign of strength in the underlying asset. This group of investors looks to capture the gain on a move lower, but they are usually unwilling to take on as much as risk as other investors.
Limitations of Using Weak Shorts
It is hard to predict the number of weak shorts and difficult to decipher if the short positions are held because the stock is falling. Whether weak shorts or not, these traders are in the correct position to profit, and buying into them may be foolish.
Trying to force weak shorts out of a position, causing a price pop, may prop the price up temporarily, but unless positive news, fundamentals, or technicals emerge, additional buyers may not decide to enter and the price will continue to fall.
Weak shorts are a strategy that can’t be measured with great accuracy, therefore it’s unknown exactly how many weak shorts there are or how weak they are.