Trading Analysis - 13th Dec 2018

Alfacomp

13 December 2018

8:50AM


As predicted yesterday the same shorting approach - dropping in multiple 50K Sells early on played out today. Yet again the buying response was strong. Yet again we see large Sells (150K at 8:32) being printed without delay whilst multiple large buys (NickD et al) have been hidden from view.

After the initial recovery they tried twice to knock the price back down, the second time bing aided by some further 50K sells from (presumably) a shorter who is now starting to feel the pinch. Once the large Buys get printed the price will be allowed to move back up and the short squeeze will begin. It is entirely possible that we see a large sell of many millions printed later on as the MM's finally clear out their tame seller and close their short at a significant profit.

9:20AM


NickD's first 100K buy reported now but not the second. Can anyone see a pattern here ?

9:30AM


NickD's second 100K buy now reported - clear that the short attempt has been defeated again and there's an excess of 450K Buys already today.

9:50AM


It's one way traffic now. 750K more Buys than Sells. Remember the short started yesterday so perhaps they are not getting squeezed just yet, but it may well be getting to the squeeky bum stage now.

2:40PM


Definitely a short squeeze in play now - almost 2 million more Buys than Sells. Fully expect a large Sell to be printed some time in the next couple of days - this would be the smoking gun that would see the removal of one (or possibly all) of our tame sellers from the March 2018 placing. At that point the day trading crowd will all turn up to get their 3 or 4% per day. But for me this hockey stick behaviour is clear evidence that this is only going to end one way, and that is above 40p.

End of Day


Despite 2x 250K Sells turning up (37.0p and 37.6p) and a reasonably chunky Sell of 148,860 appearing around 4pm the nett trade position continued to grow after 2pm, finishing the day with 1.9M more Buys than Sells. If this remains unaltered by delayed Sell reports then the MM short exposure will have increased to 9.8M.

The castellated behaviour in the early morning trading was clear evidence of one Market Maker trying to hold back the share price, presumably trying to encourage further PI selling, no doubt to fill their own short position. It appears that they may have been fought for control of the market by another MM at this time. Evidently the attempt to get cheap shares failed and the continued buying pressure throughout the day eventually caused the dam to break at 2pm.

Around the same time there was also some curious duplicated trade behaviour, primarily in the buy channel. These duplicates, though relatively small, have been ignored as being either a temporary reporting artefact, or inter-MM trades (though previous all inter-MM trades we have observed have been 100K or greater in size.)

The sudden movement up after 2pm was partly in response to the increased buying pressure at the time, though it may have also been exaggerated by the short MM accepting that they would have to increase their short position, no doubt to the chagrin of the external shorters who had outed themselves on the lse.co.uk board. The same behaviour occurred on the 20th/21st November - a short on the 1st day was subsequently squeezed on the 2nd day by the MM's who simply increased the SP whilst selling shares they themselves did not have, and perhaps still don't have. Evidently they would only be inclined to do this if their short exposure is backed by a tame seller.

Eventually they will run out of sellers shares to take advantage of and the SP will be forced to rise even more strongly than it did after 2pm today when 2x250K Sells were ready to hand. If they are smart they will make sure they have a long position to then take into the rise that must inevitably happen.

The announcement earlier today of the appointment of BMO Capital Markets as joint broker is of course great news - BMO Capital Markets have a very strong profile in battery metals and no doubt we will be getting some coverage by their global commodities analyst Colin Hamilton very soon - I would expect before Christmas.

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