Shorts on Message Boards
Do you even know how "shorts" work ? They bet that a stock will go down,just like you bet a stock will go up. Now a year ago when I asked broker friends of mine if the internet message boards will have any affect on a stock. They ALL laughed at me and said those idiots having an affect on a stock !
Well I asked those same friends this last week, and the answer from all YES! message boards and "shorts"(some) can manipulate with lies, and deceit. Let me tell you what I have seen on two different boards .
One stock was $8 and a "pack" of shorts come on and posted total lies about SEC violations,and "class action lawsuits".There was 15-20 of these manipulating "shorts". The stock went from $8 to $6 overnight without cause -just these manipulating "packs" posting total lies.
Another board I had seen about 15 months ago had a bunch of "regulars" on the board. Problem was these "regulars" were the nicest bunch of mostly elderly people you would want to know and talk with. The stock was about $18 and then came "the pack" of shorts. There were again 15-20 of them. They got the elderly so scared that they would not fight and just stopped posting. Thus leaving the board totally to these manipulating "shorts".
The stock went from $18 to $10 without reason just lies posted by these liars. Do you understand a little now? Let me say this to you and I want you and the whole board to think about this statement.
IT IS EASIER TO SCARE PEOPLE INTO SELLING THAN IT IS TO SCARE PEOPLE INTO BUYING A STOCK.
Now think about that, you have elderly that invest and find their way to the message boards only to see false posts about "SEC Violations" and "Class action suits" or you have a Yuppie with a kid to put in college going to these message boards only to see posts by 15-20 (probably 5 or 6 under alias) "pack of shorts" posting the same false stuff about SEC Violations or lawsuits or "there's bad news coming out" ....what do you think they will do ?
Let me ask you people who don't like my attacking back ways, language etc... Do you think for that elderly person and that Yuppie with the college kid -that it would be easier to take the money out of the stock with these rumors and put the money back into the bank? Another question :do you think it is easier to take money out of the bank and invest it into stock....or easier to take the money out of the stock and put it back into a safe bank ?
It's easier to sell the stock and put the money into the bank for nervous people like the elderly and the Yuppie who needs college funds.
THAT'S WHO THE PACK OF SHORTS PRAY ON AND DEPEND ON.
They bet on a stock to go down-not up! . Understand? And they have just as much money and risk as you. But they have the edge of fear, lies, falsehoods to post and pray on the nervous. Longs don't have that.
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Buying/selling in shorted markets
When a market is heavily shorted like SNRS(4.3M shorted shares in 40M float market), what is "normal" bid/ask behavior gets altered (influenced) by the changed motivations of the trading participants. Now there still may be be numerous (short-covering) buyers, but to get the business they put out lots of "want ads" that show a buying interest but only at a lowering price than what is being offered.
Thus, you will often see a sale at the bid price and then the bid will be lowered, as if the only people wanting to buy this dog are less and less willing to give up good money for it. Sales at the offer price, or at a negotiated in between the bid/offer price become rarer, but when made the bid price is often lowered. This is because the purchaser's (shorter's) primary motivation is to buy shares, yes, but at the lowest price the can get them at.
What also happens is that these "differently-motivated" MM's will have a stockpile of the stock and they will sell these shares to each other (back and forth) at the bid price or lower. In this way they can actually create a falling market, that results in a lowering price, frees up sellers willing to duck out, and of course gets them their covering shares at lower prices.
Eventually, if they dry up the pool of shareholders willing to sell, they allow the price to rise a bit (by staying off the bid for a while) and then lower the boom again (shaking the tree); or simply keep pounding the stock down using the 2 basic techniques above to free up more scared sellers. Of course, if shareholders refused to sell or called in their certificates the short positions would be in deep do-do. But that rarely happens because of the lack of organization among shareholders. (It takes less effort to sell or sit back and blame the company, than to actually do something and try and organize with other investors.)
All the above works best in a lightly-traded market, where there is believable doubt that can be created about the prospects of the underlying company, where good news can be contested, and where big buyers are unlikely to jump in and be a "fly in the ointment" of the above carefully-orchestrated trading activities.
In sum, look for buying at the bid, light trading, the size of the short position, consistent downward price walking behavior, shaking of the tree price behavior, etc. You know, look for a lot of the things we have been seeing on this stock over the last 3-4 months. This indeed has been a good learning experience for me. I plan on using my lessons to make a lot more money in the future with the knowledge gained.
The only reason I have continually banged away at trading behavior as the cause of the price fall is because all the board discussions were looking for the cause of the fall in numerous places outside of the market. My main point remains that this short-term price fall is most likely (and largely) trader-induced.
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