To those who read this, please note I am bullish on ADN - This can be proven by looking at all my ADN posts in the past.
I'm writing this as although I am very happy with the SP finally moving up, I do remain cautious from the price action we've seen. This post is just to express my personal opinions on possible scenarios that could explain the recent price action. So to all the ADN bulls who don't like seeing posts with relation to any potential negativity, please don't think my intent of the post was for this - It is just my opinion. Hotcopper is used for information and opinions to be expressed amongst shareholders, so that shareholders can go on and conduct their own research and construct their own opinions on different matters, to make investment decisions for themselves.
Firstly, I know its happy days for all holders as we're finally moving upwards after many many months of being held down by short-sellers. However, we still have to wait (T+4 days) for the short's brokerage data to be updated for this week. I will say that the ASX daily short gross sales for ADN the past week or so have been very very low compared to the average daily shorts we've seen the past few months - This is a great sign. I believe the number is not net short sales (i.e. if 100k shorts were sold and 50k were bought by another short seller, would it list the number as 50k short sales for the day?) - I don't believe this is the case.
When the data is released next week for opened short positions as of this week, I will be eager to see whether short positions have dropped dramatically, i.e. implying that this weeks price action up to 20.5c has been due to short positions covering - Or whether short positions have only slightly dropped or even somehow remained the same (i.e. Practically all the buying has been from regular buyers, which I hope is the case as this would mean short-sellers would have to cover at current/higher prices assuming if they were to start covering as of now). This leads me to why I' remain cautious.
**All IMO** In my eyes, the logical scenario would be that if we've gone to 20.5c with short positions barely covered (i.e. the majority still remaining opened), I'm personally going to be very sceptical, because why wouldn't shorters have begun covering from the lows of 14c all the way up to now, and continue to cover over the next week or whatever? Do they know something BTS making them decide to "let off the gas" from additional short-selling, so that price action naturally increases for a bit for the intent of shorting straight back down to where we were? I obviously hope this is not the case, but I think its fair to be cautious over a potential scenario like this, as there have been many times when ADN was at that 15c area, bounced back up to 17c or so, and then come straight back down from shorters.
If the data comes out and short positions have dramatically dropped then that's obviously a no-brainer, a big win for holders.
Just thought I'd discuss my thoughts, as I'd hate to see people enter a euphoria-type view thinking that under 20c is done and dusted and never-to-be-seen before, just for it to come back down from shorter's selling it down from higher prices. It would be dissappointing in the eyes of many, including myself. I obviously hope that shorters have begun covering, and to see ADN making moves higher, as plently of newsflow is in the pipeline over the next 6 months.
IMO I don't see the scenario of a "squeeze" occuring, i.e. All short positions are closed within a very very short time-frame (such as a single day or even a week) unless there is such a significant announcement that buyer demand reaches levels we saw when funds were required to buy ADN due to the rebalance, or even demand levels we've actually never seen before. In saying that, I think there still remains a chance of this happening only if general buying demand becomes excessive while current holders don't give in to selling at resistance levels, leading to the reduced likelihood of the SP coming back down dramatically (i.e. Letting the SP go for a ride ).
Cheers, YK
ADN Price at posting:
20.5¢ Sentiment: Buy Disclosure: Held
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