If you had not noticed, or if you have not participated, there is a technique I call "research and destroy."
A stock researcher finds a short sale candidate. This stock may have some hidden fraud, or weak holders, or some other vulnerability. He does his homework and if he does not have his own short fund, he tells those who do.
They all short the stock and once they have a good position, with great fanfare they publish the hit piece on the stock with huge publicity.
The stock craters and the shorts have one of the best trades in the world -- a sure thing and a short term sure thing at that.
Never mind the merits of the company or that the research of the shorts is questionnable, the important thing is scaring the weak shareholders into dumping the stock.
With a fast hit like this, a drive by shooting, no one has a chance to dig into the real facts.
The media, hungry for news, and loving stories that invalidate things and people, give the researcher's claims a wide distribution.
This starts the stampede of the longs to the exits and with the resulting short term imbalance in supply and demand the price goes into free fall.
Only after a month or two can the stock recover if the selling is unwarranted.
But who cares, the shorts have their fast profits and time to cover at leisure.
Risk to the shorts = almost zero. The only question is how far the stock will go before it is time to close out the trade.
Now it helps if the stock is that of a Chinese company traded in the United States as these companies are under a cloud and they do not know how to defend themselves from short sellers.
The big shorts have someone else act as the front man in the media. The big boys like privacy and why put yourself out there to be sued when you can pay someone else to be the public mouthpiece and take the heat.
Where else are you going to find a short term sure thing like this? You put up 50% of the price to go short. If the stock drops about 50%, so you have a 100% profit in a few months. What is the worst that can happen? The stock does not drop on the hit? So you cover even and lose nothing.
Research and destroy.
