You are not. My point was not to equate the uptick rule of the past with the one that was instituted in 2010. My point was to demonstrate that that statement "You need to create a net buying or net shorting position to make any lasting impact." is not true. If it was, and there is no way to manipulate the stock by selling on downtick, at a lower price, SEC would not have regulations on the subject, unless it is fond of fighting wind mills.
So my post was not meant to be encyclopedic on the subject of the uptick rule, but meant to point out that dismissal of short selling conspiracy theories and underlying beliefs of what can and can't be used to manipulate stock associated with this dismissal are wrong.
Your comment is correct but tangential to the point I was making.
Rather than discussing in the theoretical realm, let's look at a specific example. I'm not really addressing this rant towards vgrinshpun, because he understands what's going on. Rather this rant is for others. When the Q3 delivery numbers came out, TSLA traded horizontally for the better part of the day. Here's the chart:
Why? Short sellers saw that TSLA was in danger of climbing above the critical 215 level, just above which resided important technical points such as 50dma and 200dma. Technical experts were saying that if TSLA could climb above these numbers it would go a lot higher. What happened? Here are two choices: longs set sell prices right at the 214 and then later the 213 price points in order to get rid of their stock before it reached 215 and climbed much higher or 2) short sellers sold however much was needed to keep TSLA below 215. Of these choices, only the second one makes sense. So, the shorts sold at 214 and 213. They held the line. The next day's closings were 211, 208, 201, and 196. Why did TSLA descend? Longs were shocked that TSLA could not break 214 and then could not hold its value. Some thought "the people with inside knowledge know something we don't" or "it's that damn SCTY merger screwing up the stock price again." In fact it might have been a little of #1, but there's little evidence to support it was #2. The day after the shorts held the line at 214 and then at 213 they launched a ferocious bear attack right after opening bell. Check out this chart:
The Oct 4 short attack is classic. Look at the deep downward plunges followed by immediate near-recoveries. Shorts were selling large blocks, which made for big shares drops, but longs were bidding the stock back to nearly where it was before, shortly after each dip. After numerous deep dips, the longs grew wary and stopped bidding the price back up and the SP fell.
On Oct 5 we saw TSLA plunge in the final hour of trading, as if someone knew that something negative was coming, and the following day Goldman released its negative note on TSLA.
So, the patterns are:
* Cap the stock from rising above certain critical technical levels that could induce significant further climbing
* Induce a bear attack in the beginning of the day through large and frequent selling of blocks of stock, then once the downward momentum is rolling, let the run-of-the-mill shorts and the weak longs continue the selling
* Coordinate with FUD and FUD-like analyst recommendations, especially if you know they're coming
* buy back in once the SP is significantly below the selling point
* repeat
And so we saw lots of short selling by the big dog shorts, first in the 213-214 range (Oct 3) and then in the 213-209 range (Oct 4), and the 211-208 (Oct 5). Chances are that many of the big dog shorts reloaded by buying back in throughout this week at lower prices than they sold, but those who held to the end of the week could buy back in at only a bit above 196.
If you ask whether the buying back in negates the effect of the original sale, the answer is a clear no! Once the fear of falling is created, other sellers (small shorts and weak longs) continue the selling, which allows the big dog shorts to buy in at substantially lower prices than they sold. It's all about market psychology and getting the small shorts and the weak longs to join you in pushing the stock down. Do you really doubt that the shorts who held 213-214 on Oct 4 by selling could not slowly buy the needed shares back to cover at prices below their sell-in prices and that this buying would still allow the stock price to remain below the sell-in price?
PS: Because of the experience of the Oct 3 and subsequent day's trading, I resolved to sell quite a few positions the day after the Q3 ER because I understood how the shorts are capable of walking the SP down. Unfortunately, many others decided to do the same exact thing and we lost nearly all of the Q3 ER's gains after they peaked in the morning. Here again is a case of the fear factor induced by short-seller manipulations. Too many of us resolved to beat the other guys with our selling after the ER and we all know how that worked out.
O
