RE:RE:RE:RE:RE:RE:RE:SHORTS ARE CRASHING THIS STOCK I was going to post some thoughts and info about SU shorts anyway, so if some folks don't want to hear about it, just put me on ignore.
From the trading action these last few days, we have seen some very heavy sell volume and SU has dropped more than its peers.
Several catalysts enabled this. The Nov 29 investor presentation included no surprises, and left us in wait and see mode, with new production guidance slightly lower, and additional capital expenditures expected. Mainly, the sale of PetroCan is a no go, so those holding SU waiting for an immediate cash windfall were disappointed as the feast from carving up the golden goose was cancelled. Oil prices have also come down into the $70s, and diffs are still wide. The Ex div date brough on more.
Some saw this as a good opportunity to go short for a temporary short trade.
Check the following short report from Nov 30:
https://shortdata.ca/stock/SU.TO
Interesting to note that half the November short interest was accumulating even as the share price was rising into mid November as positions were being established.
SU short sales have increased from 12M shares to 117M shares by Nov 30, and no doubt more piled on in this first week of Dec with the heavy selling on the US and Canadian sides as volume doubled.
Realize that all these short positions that have accumulated and those that have piled on after them are in profit, and will need to cover. As Experienced said, this is a technical move, where a catalyst of higher oil prices might be just the trigger to force a massive amount of cover, and create a strong short covering rally.
We are left to await the Russian response to the embargo and $60 price cap, and the OPEC meeting this weekend.
We have had the NFP report Friday which was market bearish anticpating higher interest rate levels, yet bullish oil fundamentals are still in play.
Product inventories are in seasonal build time, so emergencies and actual shortages may not play out.
I have been considering buying in the money SU call options again a few months out to catch the spike when the shorts need to cover, so am waiting for short volumes to taper off on both TSX and NYSE, which they seem to be doing as of Friday.
Current Max pain option positioning on SU does not show a heavy enough threshold to warrant manipulative share price adjustment on expiration days.
The slight contango in the crude futures curve has indicated a temporary oversupply in the market, while consensus says the crude market will get much tighter in 2023Q1. This will help keep a floor under oil stocks, as they look far into the future.
Another indication is how well the oil stocks are holding up, compared to the drop in crude. Run a chart XLE vs Crude oil. The divergence has been noted by the market, creating 2 camps. Some think oil stocks should fall down to match the price in crude, while others think the crude drop is overdone, and should rise back to the level where oil stocks are.
If we have further economic pain, less demand, lower stock markets, crude may drop and this wil be a drag on oil stocks.
On the other side, we could see a big advance in energy. The stock market may remain strong and paces itself for a soft landing, China may come back, OPEC may cut, inventories will drop, Russian oil is cut back, Europe freezes, geopolitical events, popular uprisings, product shortages, SPR buys, refinery outages, etc.
I welcome more thoughts on this.
Experienced wrote:
Wynjoe wrote: How low do you think shorts can take this,I'm relying on your answer and yours alone.Thank you.
Great question...
Frankly, I don't have an answer as to a specific price.
As long as there is heavy volume on the downside it suggests that more shorts are "piling on" and the SP will continue to fall. When you see intraday a gap down and then a reversal on the upside with heavy volume then the short party is over and it is time to buy back in. This is what I will be watching for.
In short, you need to monitor the stock daily and wait for the shorts to tell you. There really isn't a way to determine a priori at what price they will cover their shorts. Given that the company just went x dividend, the shorts don't need to worry about covering the dividend for another 3 months and so that math isn't a worry to them. IMO, the only real worry to them would be a spike in oil prices in which case they would reverse positions very quickly. So I guess, in absence of any developments leading to a spike in oil prices, the short party could last quite a while.
While not necessarily reliable, traditionally shorts tend to base decisions not on fundamentals but on technical indicators. From technical point of view, looking at the charts, there seems to be support for the SP in the 39-40 range so this could be a price to look at in terms of what they are doing, but as I said above, it is really difficult to anticipate what they might do.
Not sure if any of this helps...