Short selling works when you can scare the current holders into selling their shares and would be buyers from staying on the side lines.
And its is done very professional at times and the big boys like to work as a pack of wolves hunting its pray and pushing it in a corner.
They have access to the media and can bring out reports about a whole sector, say the iron ore industry, or a individual miner.
They can use broker reports to scare the investing world into thinking that China is on the brink of collapse because of the housing sector, inflation, or you name it.
They can put new targets on individual companies and put either a sell or hold onto it, because the company had its run and needs to consolidate or its overprice or for whatever reason.
They can come out with reports that the Chinese have stockpiled so much iron ore at their ports that the prices this year will probably go down by 50% or so.
Once they have spread their negative opinions (read FEAR) thru the media that you and I use for our investing strategies, they will start selling shares in the company, or companies if they are taking a whole sector on.
The selling will trigger stoplosses and more shares are being sold, chatlines are now full with the negative news and fear takes over from greed and the selling gets even stronger and feeds on itself. By now the big brokers and hedgefunds are sitting back and watch the shares fall, if need they jump in, and sell some more to keep the momentum going.
Once the shareprice has fallen to the level they want it to be, they will start accumulating the cheaper shares, but in such a way that it looks like there is still selling pressure. So expect lots of shares stacked up on the sell side and walls of shares at certain prices, to stop people getting excited buying into the shares again.
Its the only way the funds and brokers make money so we can expect these attacks on shares at any times especially after a healthy run.
But with strong fundamentals and earnings it would be much higher for shorters to push AGO down to their targets and shorters do NOT always win.
If shorters do now win they will have to buy the shares on the market and have to do it quick before the share price runs up too much otherwise they will loose even more money.
So when shorters are burning you could expect a spike in the shareprice.
Hope this helps you to understand the way they work.
shorters work on FEAR....
And FEAR is stronger then GREED.
good luck
and if you are like myself in for the longrun , keep your shares in your bottom draw and you should be just fine imho.
jojo
AGO Price at posting:
$3.85 Sentiment: LT Buy Disclosure: Held
