It is common on HC threads to blame big price falls on shorters knowing something when reports are released, but while it is likely fair that a large chunk of most drops is shorting, it is wiser to consider what the shorter might have thought he knew before the report rather than focus on the report content as the cause. In this case, if the shorters had collectively really known the negatives in the report the price would not have fallen 12% on the day of the release but before the release. Given the market reaction, I posit that the shorting community was essentially just as ill-informed on the content as the rest of us. More likely this morning some saw an opportunity to crash the price further and simply took it. In these scenarios it is usually over done but then suported by the same shorters buying back for a quick profit.
In reality, regardless of the report I had today projected to be between 83 - 86.5 based on the Li stock price movements on Friday in the US, so the report only moved the price another 9c down, - not so bad - but enough to negate the argument of considerable for knowledge. In fact it is more of an inditement of the poor quality of the funds data collection in that the issues noted in the report would have been widely known amongst the mine workers, yet all the funds seem to have completely failed to discover that information.
The explanation for the shorting over the last month is much simpler - the Li spod & LiCO3 prices have been falling, and as with previous shorting rounds it is this indicator that the genius's at the funds use to undertake their business. Reports coming out of China of a generally failing economy combined with recession fears in the west are enough to allow them to conclude that the immediate future will see further prices falls and thus the revenue lines of the miners will theoretically be hit. This analysis ignores the fact that most producing miners are working to contract arrangements that only have a passing relationship to the spot prices, but nobody says these people are geniuses or interested in the nuances of each mine - simply because they don't have to be. To most people falling wholesale product price means falling revenue thus falling earnings thus falling SP. Simples.
A report that does not exceed expectations just makes their job on the day easier, and provides an opportunity to cover some of the risk. It is worth remembering though that typically shorters are always covering. The strategy is not generally just to sell and wait but to cycle thus reducing the risk and allowing the same borrowing to work multiple times to push the price down.
Having said that this was my chart for the day:
Pink rays are my price ranges based on the recent trend channel
Orange & yellow (closing) based on the basket of US stocks I track to predict the next day's Oz channel for Li stocks and the blue marks the enveloping "major" channel, which we have hit today surprisingly.
The last wave 5 failed and the ABC correction projects that we could fall as far a 67.5, I suspect we are more likely to reverse around 70 to 74.5 - in other words around here, but that is based on instinct rather than analysis. I don't expect it to fall below the start of wave 1 of the previous wave sequence, but again that is not TA but feelings. I think the RSI has gone as low as it should for a producing stock with no real existential problems, and a geo-politically stable mine site (ie.no likely political threat, and a profitable business production costs less than reasonably expected revenue)
(20min delay)