short and distort, page-113

Fair enough, but if you haven't been watching it fall day after day, minute by minute like some of us have and seen the detail of the trading action, what you aren't able to appreciate is how hard it was for the shorts after the fall to $3, and how little margin they have been able to make in each fall. At every run down a few long term retailers have come back in and traded against them. They had to spend heavily to stop the recoveries on a majority of days and buy back after small falls, and then retail traders would take out some of the high sale spots so their sell downs were not always getting the peak of the recovery and their buy backs weren't always getting the troff of the dips - often insufficient to cover the costs of the push down, and then do it again, day after day. It has been a battle fought for eight months with retailers constantly spoiling the game. Its one of the reasons they had to force it down so low. On days where they got the biggest falls, there would often be little volume in sales at the top and they would sell into retailers waiting at the support point, and likewise, on the way backup few shares at the low end and higher volumes at the top as retail traders bugged out on the climb. Heck - I have been doing this myself. The shorts have not been the icing on the cake, they have been almost the whole cake with retail longs picking tops and bottoms on almost a daily basis. The chart shows only a tiny part of the story.

And where they stand now they have 70m outstanding, they have been unable to cash out, although the nature of the battle and the fact that they have been most of the trades on both sides of the offer/bid matrix means that they have essentially profited off each other swapping the profit and losses back and forth all the way down turning over the same shares, with limited supply of available shares, and based on past behaviour (where they backed off around these levels) very little lending supply left, and an astoundingly stubborn core retail group who simply wont sell out without buying back in very quickly, or simply keep accumulating. Until those 70m are bought back the current shorters have not made a profit - it is just a paper gain. Lastly - just look at the forumn over the last week, the whole ethos has changed, old holders are coming back, there is a new confidence and there is an air of expectation that has returned. Essentially many have been sitting on the sidelines who are now either trading or buying back in.

Sure some shorts are going to make a nice profit - those that shorted early and stayed out of the daily battle, or those that have cashed out in the last few days, or cashed out for less than the total drop and stayed out, but those shorts who are still here or who joined in recently are one sneeze away from being obliterated. A short has to be able to both sell the share and buy it back again. If the price drops on no volume, they haven't sold at a high price, and if it climbs on no volume they haven't been able to buy back at a low price, and if they then have to blow a couple of mill to hold it in the middle of these positions then all they have done is postpone the profit for another day - when they still have to buy it back. If they then have to spend more shares to push it down again and then buy back within 10c of the sale price they aren't doing to well even though the SP might seem to have dropped by 30c. A long, drawn out eight month battle to push the shares down is not especially profitable for the shorter, any more than it would be for a long with piles of cash doing the same thing, if he over played his hand and failed to exit near the top. A faster fall by the same amount, with a long drawn out time at the bottom while the shares are bought back is the ideal. This is not what they have yet had, and I think their mistake has now been that they have pushed this down too far. The opportunity to exit was this week. Those who did will have made a profit - as long as they resist the temptation to have one more go.

The same thing can happen to longs trading the upswing. I have had days where I got the timing wrong, sold at the wrong point on a trading pause, or set my entry point a cent below the turn and couldn't buy back fast enough as the shares lept up the scale in the space of a day always ahead of my price, then reentered just before the peak, and didn't exit fast enough on the retrace - so the chart shows a nice profit, but I show a loss. I have had months where I have traded a share profitably for weeks, day in day out, and one day can wipe it all out and I am left holding or cutting my losses to break even. Whether you are short or long a chart climbing or falling in your favour does not always mean a nice profit as a trader, and a short is essentially always a trader - but like a margin trader, they pay every day to trade.