Ok, the bull deserved another rest and it did a soft landing on the pasture. Price is still above the 5 MA which is bullish.
As far as I’m concerned, the market is in very bullish mode. In fact, after hour SP500 is up 10+ points already.
Well, the big elephant today is the collapse of $DMRC price in the wake of a massive short-attack. I’ve to admit that this was quite an organized effort that involved orchestrating a giant buzz that called for shorts from all walk of lives to join the bandwagon.
“Come on over, shorts the h*ll out of this over-valued stock!”
“$5.4 million Revenue? Loss of $4.5 million! Market Cap: 200.39M!!! OMG!!! So over-valued!!! Short! Short! Short!”
“Hey, Walmart’s CEO instagram did not mention Digimarc. It might not be Digimarc! I’m shorting too!”
“OMG! The tree is falling! It’s going to $10 or lower! I’m shorting too!”
I’ve to admit that I watched the whole debacle with amazement. No, I did not sell a single share ’cause I’m in this for the long haul and have no intention to let the short-sellers tell me what to do. Remember, I bought $DMRC in the main port which is a cash account. Thus, I’m not subjected to any margin call whatsoever. It is my opinion today action was the shorts attempt to force a walk-down on price to create a panic of long investors so they can cover from the continued trend.
Remember that this is a low float stock; thus when a lot of people are shorting, the price “should” drop like a rock in a short-time frame. Instead the stock price was falling in a stair-step fashion. This could only happen because there were buyers in every step on the way down. It just so happen that there were more people shorting/selling at each step than buyers; thus a gradual step-by-step downward movement.
Take a look at the 5 min. chart below:
There were four occasions (see the four circles) where buyers exceeded sellers which created small bounces. And because short-sellers from everywhere were coming over to pile on the shorts not knowing what they were getting themselves into except to hear those sound bites mentioned above. It was like a feeding frenzy.
Believe me or not, there were buyers picking up shares during the whole trading day. My hope is that these were buyers from old and new investors picking up more shares and NOT the short-sellers covering. In fact, I sold some $AKAO to buy more $DMRC when price looked so attractive in the mid-20s. IF the majority of the short-sellers did not cover today; then we can expect to see a big bounce coming. The shorts SHOULD have covered today but their greed might have stayed their hand ’cause they were looking for $10 or lower.
Remember how we sometimes see a stock rallied strong during the day but gave back most gain the next day? Well, this is exactly the same thing except in reverse. Once the shorts find no follow-thru tomorrow, most of them would start stampede out of the door to grab profit before it disappeared.
The collateral damage today would be those who got shaken out of their shares today due to either margin call, stops getting triggered, or simply panic selling.
Due to my conviction, I was actually quite calm during the whole debacle. Listen/read the earnings transcript again, the progress is real and Bruce simply could not give out revenues projection without an adoption confirmation by the big box retailers/private label. This is an event play thru and thru.
“What event?” The newbie shorts want to know.
An event that the long investors expect the big box retailers/private labels to adopt the Digimarc barcode.
“I don’t think so” the short retorted.
Then ask yourself why did Digimarc plan to hire another 10 employees by the end of the year after adding 16 more last quarter?
Also, Bruce mentioned that their booth at the January Big Retail show will be 3x larger than the one they had last year. Wegmans was in their booth last year, who do you think is joining Digimarc booth that is going to be 3x larger?
Here is another one for you, what made Bruce said the following in the earnings update:
“I believe we are in the right place of the right time with Digimarc Discover and Barcode, the barcode of everything. Retailer desperately need help wining in their stores by building digital relationships with their customers at the point of purchase. Discover offers much broader engagement proving a seamless shopping experience of scales effortlessly and globally across every brands impression in the shoppers increasingly mobile.”
Here is the message to the shorts: You may win the day with your attack but have you covered yet? If not, you better watch for the bull behind you!
Notice price bounced off the support at the $24 level.
Still holding long and strong with more shares added today.
Main port: DMRC, AKAO, IBIO, BIOC, AMRN Trading port: ARTH
My 2 cents
From my camera (click on photo to see image at 100%)
Categories: Daily trading Journal