After a very bullish share price rise across 2017 to a market capitalisation well over a billion dollars (off the back of rising prominence of the stock and the extraordinary climb of the cobalt price), in 2018 and 2019 the CLQ story reversed, with a short term excess supply of cobalt sending the commodity price crumbling back down to near its starting point prior to the 2017 bull run.
During this time, institutional interest in short selling the stock rose off the inevitable understanding that the cobalt price was falling in the short term and that there would inevitably be a gap between the feasibility study and construction of the project (often referred to as the orphan period) and represented on the chart below in yellow/gold.
Fast forward and we are now placed at the beginning of a pivot point as we are about to enter the production phase of Clean TeQ's upward share price journey....
Manipulative Short Selling: The price is extraordinarily cheap right now... by design...But why now, with rising cobalt and nickel prices, and the impending announcement of financing and the upcoming green light decision from the board has short-selling begun to peak again, right before the share price is about to break free and begins its northward journey?
Manipulative short selling has a long and colourful history on the ASX share market. Beyond the ASX, short selling dates back to the origins of organized stock market (Allen and Gale, 1992). Stock manipulators have carefully timed their aggressive bear raids to exert maximum selling pressure. Manipulation can occur when informed traders can take advantage of uninformed traders who must trade to meet their liquidity needs.
CLQ is a perfect stock for short selling. Active traders are the critical enabling factor that facilities manipulative short sales in market equilibrium. Active traders are uncertain whether the seller knows that the stock is overvalued or instead intends to manipulate the stock price downward. They are less knowledgeable than informed investors or manipulators but more knowledgeable than uninformed traders. Thus, they sell in response to short sales by informed investors and manipulators, whom they mistake for informed investors, which allows manipulative short selling to be profitable.
There is significant manipulation of the CLQ share price taking place right now. The proportion of ‘bot trades’ (<$20 in value) is very high. Further, the percentage of total shares short sold continues to rise (now at ~6%). Remarkably, this is despite the fact that the nickel price is absolutely on a tear right now off the back of news from Indonesia at a 5-year high and
above the levels assumed in the DFS for Clean TeQ.
The Pivot Point: darkest before the dawnThe institutions are positioning themselves to accumulate at basement levels right now prior to a rebound and this is happening across the sector. Shares are being shaken from the hands of retail and Mum and Dad investors with quiet accumulation.
But the exciting thing is this. Smart money has profited on the way down (with a falling cobalt price off the back of short term excess supply) but they will also profit on the way back up again and drive the impending CLQ bull run.
The tide is turning and institutions will drive this back up to the levels of old. The seeds are being planted. UBS have recently reversed their cobalt price forecast, predicting a climb of 60% over the next 18 months as demand now inevitably catches back up with and subsequently exceeds supply.
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Net tangible assets per share for CLQ stands at 30 cents – remarkable given that the share price is at 32 cents as of today. Despite a soaring nickel price, a rising tide in this situation is not lifting all boats....
The share price is extraordinary cheap –
by design. I for one will use it to my advantage.
(20min delay)