"Too many retail traders" vs shorts?

A very successful trader on this board once advised me to pull out of a stock in part because "for every share held short, there are almost double as many shares held by retail longs". He was 100% right, and I was 100% wrong.

What is the significance of such a ratio? Is that really such a danger sign straight across the board?

 

Nothing. That's like saying you should cover because dogs outnumber cats in this world.

 

I wish someone would tell that to the fertilizer producers or shorts.

 

Okay, okay, it was Rearden Metal.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=68129&perpage=6&highlight=drl&pagenumber=6

 

I assume its a way to gauge how optimistic people feel about the stock..

the theory if everyone is aboard, than it can only signal the top.

but i dont know if 2:1 longs versus shorts is that significant point, where the tide would turn,

this is just a simply model, it completely ignores other variables, like how many people actually hold the stock, how many people are on the sidelines.. etc..

 

That's pretty interesting. It might be worth a look to investigate % of short interest to institutional ownership.