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I watched every trade in RMBS on Friday and I can assure you that much of the selling was short selling. How do I know? Because much of the trading occurred at the ASK price, not at the bid price. Yet, the stock dropped. Short selling, of course, only occurs on an "uptick." In effect, this means that short sales are posted on the ASK -- never on the BID. To give an example, during the last seven minutes of Friday, the BID was at (about) 75, the ASK at 75 1/8 to 75 1/4. Yet very few trades came through, and those that did were in the mid 76 ranges until the final seconds of the day -- then a few trickled in in the mid 75 range. What does this suggest? That there were few buyers and no real sellers other than short sellers. Sellers would have sold out, but short sellers had to wait for buyers to come in (for an uptick) that wasn't happening. Thus, no real trading. In addition, the low ASK price was almost always an ISLAND offer. Sometimes it came from Schwab or Etrade. Thus, not institutional, but rather mom and pops. RMBS is under a short attack -- clear as day. And that attack is predicated on scaring longs into selling out at any price. Will it be successful? I have no idea. But the shorts are working under the assumption (posted here often enough) that RMBS is dead money for two quarters because earnings will be flat (was that really new information?). And that Edelstone would not protect RMBS since it already had a nice move to his target price (FTR, he said the same thing about BRCM -- which still trades above his target), despite the fact that RMBS has corrected 30%. |
