Wednesday, September 15, 2010 4:21:31 PM
fundamentals are solid, stock prices will eventually return to a higher level.
After short sellers have looted current investors, new buyers are then able to
pick up equities far below their real value.
On occasion, however, short sellers overplay their hand. Just as investors can
be caught up in trends, short sellers can fall prey to herd behavior. When this
happens, too many contracts for short sales are made. When short sellers are
forced to go to the market to get the stocks needed to cover their contracts,
they push the value of the stock up themselves. This is better known as a short
squeeze…
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