Do you own the 10 most shorted ASX shares?

Could the Orocobre Limited (ASX:ORE) share price and nine others come under more pressure as short interest builds? Here are the 10 most shorted shares on the ASX…

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Every Monday morning I like to start the week with a look at ASIC's short position report in order to find out which unfortunate shares are being targeted by short sellers.

For those unfamiliar with short selling. A short seller will borrow shares to sell on market with the aim of buying them back at a lower price in the future and pocketing the difference.

As it is a high risk strategy with the potential for limitless losses, short sellers will often only take a short position if they believe they have a high probability of success.

For this reason I believe it is prudent for investors to keep a close eye on short interest levels.

At the moment short sellers are betting on the 10 shares below taking a tumble in the coming months:

  • Orocobre Limited (ASX: ORE) is yet again the most shorted share on the Australian share market with short interest of 19.3%. Although I am bullish on the lithium mining sector, two production downgrades this year makes me think it would be best to avoid Orocobre's shares.
  • Western Areas Ltd (ASX: WSA) has seen its short interest surge higher to 18.1%. Although improvements have been made in nickel prices recently, it hasn't stopped short sellers from taking an interest in its shares.
  • Syrah Resources Ltd (ASX: SYR) short interest has rebounded after two weeks in a row of declines. Short interest in the graphite miner has jumped to 17.8% ahead of next month's opening of its Balama project.
  • Myer Holdings Ltd (ASX: MYR) has 16.6% of its shares in the hands of short sellers. A recent full-year profit downgrade is likely to be the reason for the sudden rise in short interest.
  • Independence Group NL (ASX: IGO) has seen short interest rebound to 14.5%. Delays at its Nova operation and increasing costs are largely behind the high level of short interest.
  • JB Hi-Fi Limited (ASX: JBH) has now seen short interest lessen slightly to 13.6%. Short sellers appear very bearish on the electronics retailer's prospects due to the imminent launch of Amazon in Australia.
  • Retail Food Group Limited (ASX: RFG) has 13.2% of its shares held short. Short interest has risen sharply in the last few weeks following the release of a disappointing trading update from the food and beverage company.
  • Metcash Limited (ASX: MTS) has 12.1% of its shares held short due largely to concerns over how the supermarket price war and the Amazon launch will impact its future results.
  • Aconex Ltd (ASX: ACX) has climbed back into the top 10 with short interest of 12.1%. It appears as though short sellers expect Aconex to disappoint during earnings season.
  • Ardent Leisure Group (ASX: AAD) has short interest of 12.1%, up slightly from last week. While a recent trading update from its theme parks division revealed major improvements in its performance, it hasn't been enough to shake off interest from short sellers.
Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO and Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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