Hi all, so while price spins it's wheels at the moment I hope you don't mind if I explore something that seems very weird.
A couple of weeks ago,
@grasschoppa posted something about how unusual it is for Nett Shorts to be increasing at the same time price is increasing- for shorts and price to be on the same trajectory. I was thinking the same thing and put the below chart together just to see it a bit more clearly, and since then apart from a couple of days of "normal" correlation the weirdness has continued. The ASX don't make it easy to do this by the way- you can get the running aggregated nett shorts totals and history from the ASIC website (4 days delayed), but there's nowhere (for free) I've found to get a running total and history of the non-aggregated daily shorts reported, and none of the short data sites include all the price and volume data so you have to pull the data together from multiple sources. Shortman used to include a chart of nett shorts vs price for every stock, including the last 20 days of non-aggregated daily shorts- which was handy to compare against the nett shorts increase or decrease to confirm or detect when shorts were being used to cap price in a consolidation range. Suddenly Shortman dropped the 20 day daily shorts table, so I spoke to the guy who runs Shortman (via email) and he said he'd received a "cease and desist" letter from the ASX and he was working on a resolution. I assume it was about licensing fees or something, but obviously an arrangement has never been reached. Hmmm.
Anyway, here's my chart- where a yellow box highlights the strangeness that choppa pointed out. During the December period before the yellow box where the white price line is plummeting, you'd typically expect to see nett shorts increasing as more short traders jump in to take advantage of the downtrend, but nope the red nett shorts line if anything went down a bit during this period. And then at the end of December at the bottom of this move, price had become extremely "oversold" and there was obvious demand coming in and you'd expect to see nett shorts decreasing somewhat with covering/profit taking at this point and then more short covering with shorts stops being hit adding to the demand during the following price move up. The chart was screaming a (short term) relatively low risk buying opportunity which many traders like
@Hollyw00d and yours truly took advantage of- it certainly did not look like an opportunity to double down on shorts. But what did we see?- nett shorts skyrocketed during this period!! In fact, on the normal chart, the move up in the first two weeks of January highlighted by the yellow box looked like a typical (if aggressive) profit taking pull back/ consolidation with price forming an ascending wedge while volume trailed off towards the top of the move. I've included a daily chart below to show what I mean.
I've also included daily volume on the shorts chart, showing the daily increase in nett shorts in red, and decrease in white to give a bit of context to the term "days to cover". You can see that the increase or decrease to the nett shorts total is usually quite low as a percentage of daily trading volume, with a few obvious exceptions on some of the very high volume days, so if shorts are forced to reverse their positions in an "orderly" fashion it will require more than 4 or 5 times as long as whatever the days to cover is. I can see why choppa is excited for a potential short squeeze, but at the same time I've been involved with plenty of highly shorted stocks and most times they seem to manage their way down over time without a Gamestop type of event.
To be honest, to me short selling is just another source of "supply" or "demand" when covering that shows up pretty well in the normal price and volume charts, but when there is this type of weirdness going on it would be nice to better understand what might be happening- any theories anyone?!
Cheers, Rooster
(20min delay)