RAC - Charts & Price Action, page-13114

It's pretty obvious that there are a number of factors that have been influencing the share price of RAC for some months. My view is it's the way they operate together that causes the SP to fall - and that's before you consider the macro economic factors.

The obvious and major influence on price is the consistent selling of Bill Garner. If we accept the sales executed through Shaws are a proxy for BG selling (and there is strong inferential evidence to make that case) then he is adding between 10 and 15% to the daily volume in selling pressure. That amount straight onto the sell side will always have a significant influence on price. Go to shortman.com.au and have a look at the list of the top 100 shorted shares on the ASX. Flight Centre has consistently been at the top of the list with just over 15% shorted. The argument floated by some that the price has increased and decreased even while BG has been consistently selling is proof that his selling pressure does not affect the SP is absurd. Prices in any company, even heavily shorted companies rise and fall over given periods - but any company subjected to 10-15% of its volume being consistently sold down will be lower than it otherwise could have been.

I don't know why BG is selling down, they're his shares and he can do what he wants with them. He doesn't owe me or anyone else an explanation.

My belief is that BG selling down doesn't affect confidence, but if you're a rational investor then your objective is to buy the most shares for the lowest price. If you watch the company closely and want to buy a position then why would you buy if you knew selling pressure was being applied to the share price on a daily basis? You can wait, safe in the knowledge than even continuous de-risking events are not going to significantly drive the price up. These events increase volume, but when the selling increases relative to the volume it means the price will not spike.

This creates the perfect opportunity for algorithmic traders. We know they're here. Just look at the broker data, prominently listed week after week is AIEX. They post on their website what they do, "Boost your competitive position in a fast-evolving and challenging trading landscape with AiEX - our Automated Intelligent Execution tool. Capitalize on strategic trading opportunities and increase reactivity to market conditions with greater speed of execution". Look at their buys and sells - generally quite balanced. What an opportunity RAC offers for them! They can pick up a parcel of shares, sell into the regular positive news and all safe in the knowledge that BG will keep selling, driving the price down. They can join in the downward pressure - just like the tiny trade that dropped the price 5c on close yesterday, wait for a price boost (assist in creating it using micro trades to drive the price up) then dump into it - then start all over again. I've heard people suggest it's Merchant, but seen no evidence of that fact. Evidence of AIEX is right there in front of us every time someone posts the broker data.

So why has the buy back been successful (and the reason I always supported it and take my hat off to Daniel Tillet)? The 'sandbags' (as people have appropriately named then) put a floor under the price. This significantly impacts the ability of machine traders to manipulate the price. It signals to retail that there is now a risk in holding off buying because the sandbags will absorb the sales pressure from BG meaning waiting for a lower entry price is not the sure thing you may have thought.

The overall effect is that the buy-back has mitigated the negative impact on price, and those that profit from the negative impact have had their activities significantly curtailed. It allows the market to operate in an open and efficient manner, how markets should operate.

I'm was a little surprised by the reaction of some when the buy-back was announced - especially non-holders - why would they actually care? It made me question their motives, especially where they have previously purported to be disinterested but curious non-holders.