Trading Analysis - 3rd Dec 2018
3 December 2018
"The continued walkdown for no apparent reason will come as no surprise to those who have been watching and who are aware that the MMs are currently short of c. 4.5M shares."
I wrote the above sentence on Friday, but I could have written it again today. The interesting thing this morning is that there appears strong evidence of short or manipulative selling before 9am - a series of 9x30K Sells, highlighted in yellow, helps move the SP from 40.5p to 38.5p - a swing from +3% to -3%, whilst also knocking the trading balance from +150K at 8:40 to -250K at 9am.
How do we distinguish between selling, and short selling ? The only difference is whether the seller already owned the shares, in which case they are not obliged to buy them back later (though they may do if all they are doing is looking to get a lower buy in price) ... or if they did not own the shares, in which case they are short selling and will be obliged at some point to buy the shares so that they can deliver them to the person they just sold them to. Both types of Seller may chose to sell in such an aggressive fashion so as to deliberately try and suppress the share price.
If short then the danger of course in this is that this position may be discovered by the Market Makers who then decide to execute a short squeeze, as appeared to happen on 21st November, or that important news, such as announcement of the dividend policy is announced and this draws in a tidal wave of new buyers. Anyone attempting a short or sell-and-buyback now should have really thought about this around the 48p mark - sub 40p is not a smart place to be trying such riskiness.
End of Day
The price behaviour after 2.30pm seems rather different - the clutch of sells at the point that the advertised Bid is dropped back to 38p (around 2:30pm) is clearly insufficient to push the trading position negative. The situation only gets more exacerbated as more sells come in whilst MMs can pick up very few shares, despite offering increasing amounts for shares. The situation in the last couple of week - discovering that the tame seller is brought in to fill the MMs pockets has not played out today - or at least not yet.
This suggests that the tame seller may have put a price floor of at least 40p on their sells. The MMs tried picking up shares from others at sub 40p today, and briefly did quite well courtesy of Mr 9x30K just before 9AM. However between 9AM and the end of trading the nett trading position rose by over 1Million shares.
If Mr 9x30K needs to buy those shares he would be well advised to get on with in asap - for the MMs have put themselves in hock for another 575K shares (now totalling over 5.1M shares short) and it doesn't look they are likely to get these at less than 40p. Mr 9x30K has received just under £107K for the 270,000 shares they sold this morning - averaging 39.53p per share - if they have to pay 40.5p for those shares tomorrow they will stand to lose £2619. Perhaps not enough to act as a salutary lesson, but maybe the punishment will be a lot worse.
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