Stock Exchanges Propose a Short Selling "Circuit Breaker"

This seems like an interesting idea floated by the NYSE and the Nasdaq.

Under the plan, a stock that ends trading with a loss of at least 20 percent would be protected from short sellers for the following three days, the people said.

They propose this as well:

Under the proposal that may be filed with regulators, the exchanges would publish a daily list of protected stocks and short sales would be barred across all markets, the people said. Market makers and some option traders would be exempt from the targeted ban. The circuit breaker could apply to all stocks, instead of only finance-related companies like the emergency ban, and expire after Dec. 31.

This list would be a very good idea to check this "circuit breaker tripped" stocks each day to see what stocks are on it. I think it would be interesting to see what the stock does on that three day quiet period. Will shorts cover during that time and pocket their 20%+ profit on the stock thus driving the price up? Or will a stock trade down 20% and then even to slightly higher for 3 days and then fall again?

You could create a trading strategy based on the first idea if it is true. What you would do in a down market is just go long any stock on the list right after the drop to capture the shorts taking profits in the stock. Then if market sentiment is still negative you short the stock again after the waiting period is over.