Short Selling: Trouble Brewing In Online Brokers? (AMTD, ETFC, SCHW)

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Short sellers TD Ameritrade Holding Corp.(NASDAQ: AMTD), E*TRADE Financial Corp. (NASDAQ: ETFC), and Charles Schwab Corporation (NASDAQ: SCHW) look like a mixed bag on the surface, but the trends in two of the three are going up as far as short selling.  Some might even call it alarming.

TD Ameritrade Holding Corp.(NASDAQ: AMTD)
Date            Short Interest   Change   Days
05/15/2008     7,524,826      -13.7%    2.80
04/30/2008     8,718,910       4.63%    2.52

TD Ameritrade was the only one of the major online brokerage firms that didn’t see a rise in its short interest.

E*TRADE Financial Corp. (NASDAQ: ETFC)
Date              Short Interest    Change    Days
05/15/2008      111,402,617      6.58%     5.11
04/30/2008      104,521,843      9.63%     4.16

This is now the third gain in short selling E*TRADE shares, and the number is starting to look disturbing if you just look at the raw number of shares.  It is also disturbing if you look at the days to cover as this is the first time that it has represented more than 5-days volume over the last year, although the good news is that the daily average volume has almost steadily slid lower during 2008.

Charles Schwab Corporation (NASDAQ: SCHW)
Date            Short Interest    Change    Days
05/15/2008      32,213,885      0.33%      3.90
04/30/2008      32,108,175     27.23%     2.48

After a solid gain in short interest by 27% on the last report, this is the highest short interest in Schwab over the last year. 

Despite the increased short selling in E*Trade, this one remains our top financial pick for 2008 into 2009 in the financial sector for our weekly "10 Stocks Under $10" newsletter.

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Jon C. Ogg
May 28, 2008