NAK Short Volume Report 6/1/2017 -72% of Sales Short
Shorts continue to pile on the stock in order to take out stops to cover and have been unable to find a material level of longs willing to sell their shares at these levels.
Shorts appear to be trapped as they continue to add risk in order to find a way to exit profitably. Levels of daily shorting for any stock > 20% are in the normal range, once you exceed 30% its considered heavy/excessive. Levels in the 60-70% range are beyond excessive
Reminder that last week we saw shorting as a % of sales > 60% all week reaching 71% on one day, and since the last short interest report in the WSJ (24 mil) the lowest level of shorting as a % of sales has been ~40%
Our estimates (based on daily tracking since the last short interest report) put the current short interest at approximately 27.5-28.5 million shares.
Volume 4.300 mil
Buys 1.657 mil
Sales 1.968 mil
DPools 0.675 mil
Short 1.416 mil
Short % of Sales (1.416/ 1.968) = 72%
A good point made on ST yesterday, that the shorting occurred at the peak of the post veto lift move ($2.40 range). Since then we've seen a low volume move downwards on heavy shorting and low volume. A reminder to longs to understand the difference between a move down on low volume shorting vs longs selling - this is why we post the data. Clearly a low volume move done on shorting means something very different than longs selling in material numbers.
In addition, what this move from 2.40 means (outside maybe a slight normal pullback on profit taking as the move up was on HIGH VOLUME, ie there was no 'gap to fill') is that MM's are most likely manufacturing this move, its called 'manufacturing a chart'. The gap that needs to be filled is actually the GAP DOWN as it has been, as I said, manufactured.
It is our view that a number of MM's were caught short in this stock on the veto lift. As such, knowing this is still a relatively retail heavy 'trading' stock where charts are used frequently, they have, day by day, dropped the stock to 'weaken' it and 'break the chart' in order to sucker retail shorts into shorting. Why?
A. MM's are trapped short
B. Institutions are buying (Data and Dark Pool activity showing this)
C. Longs are not selling despite the shorting (Daily volume composition shows this)
D. Thus, there was no one to 'sell them shares' to cover profitably.
As MM's need shares to cover, and longs in any material numbers are not being scared by the shorting any longer, a new tactic (and known) is used to draw in retail shorts. MM's don't care who sells them shares so they can cover but they need a third party to do so. How? By 'breaking the chart' via low volume shorting to draw the retail shorters in.
The continued short selling on low volume allows minimizes their risk as they search for stops, break the chart and draw those shorts in. They take advantage of a lull in buying given the down time before the next catalyst.
Retail shorts should consider the macro situation here as they have been suckered into a bear trap.
Good luck!
