RE: Hedge Funds Ditch shares in UK Companies30 Jan 2021 19:44
If that is correct then it is good news.
Half the time Hedge Funds just manipulate the share price to induce sellers who then sell and depress the price using computer algorythmic trading. Some do sell and the price drops further, then the shorters further sell increasing losses for those holding and they themselves sell more and increasing their short positions to reduce the share price further and thereby induce further selling. It can then becomes a spiral. In the UK it happens all the time and the FCA to my knowledge just watch on and do nothing about it, despite it being clear ccordinated market manipulation and abuse.
The Reddit and wallstreetbets movement understand completely how this short positions spiral works and their aim is very clever for it is to completely reverse this cycle and to turn the tables on those short positions.
The first thing they do is to ensure that nobody sells. In that way it over exposes any new short positions as they have thrown more money into shorting but will not be getting the shares required to close their position.
The second thing they do is to then encourage via social media a buying splurge on the share price by retail investors. In effect it completely turns the tables and represents retail PI's all piling in at once to create the exact reverse of the computer algorythms.
This then leads thirdly to rapid FOMO via social media - Fear of missing out
Fourthly across the back of all of this come the cheerleaders, the Marshals and the Generals to get everyone to hold the line and then more and more buy, with obvious effect.
The shorts then have to start buying back or sustain massive losses.
To be absolutely honest all the ingredients of this "movement" already exist and you can see it daily in shares that deliver good news and then you get momentum buying. bulletin board coverage and in comes the FOMO investors. Whereas in the past everybody was in the dark, with the advent of social media that is no longer the case.
The only real difference that is that Reddit and wallstreetbets target their efforts specifically against heavily shorted stocks, which in all fairness are sometimes grossly oversold.
In addition you have to accept that Hedge Funds themselves have created this wider mood in society by hammering down peoples share-holdings and wealth. There are clearly an army of investors out there who want to see them gain their come uppance + regain monies lost.
Its a movement that I think will only continue to grow around the world and it has clearly got these Funds re-evaluating and closing up their positions before they are on the receiving end themselves.
tbc
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