I’d love to be able to tell you what De La Rue does – but having checked its corporate website I am feeling none the wiser.
“De La Rue provides governments and commercial organisations with products and services that underpin the integrity of trade, personal identity and the movement of goods.”
Luckily, the Stockopedia version gives a much cleaner idea:
“De La Rue plc designs, manufactures and delivers banknotes to customers across the world."
Why couldn’t it just say that in the first place? Is it done deliberately? Are people who write this corporate zombies? The world would be a more beautiful place if we simplified what didn’t need complicating.
In any case, we can be sure that De La Rue does something, and that something has attracted the eye of many traders and investors in the last three weeks.
On 1 June, the company announced a trading update, which did not receive my attention for this reason: “unchanged”.
As an active trader, I want to be in the stocks in play. A company that is trading as expected is usually not a stock that is likely to see volume and volatility.
However, I was wrong. Looking at the chart below we can see that De La Rue (LON:DLAR) was very much in play that day.
From a trader who was in that day, it appears the market had priced in much worse prospects, and then we saw shorters completely dead and buried. I like shorting, and it’s almost necessary if you want to make money in a falling market, but there is a time and a place to short. As I explain my shorting handbook, one should be very careful of being squeezed. Being short illiquid small caps after such a long decline in price is a risky strategy.
Here’s the long-term chart.
When a stock has fallen 95%+ from its peak, it’s probably not the best time to short.
We saw a brutal short squeeze, and in recent weeks the stock has consolidated.
On Monday 15 June, we saw the price rally on good volume. Then on Tuesday, this RNS was released to the market.
