Northern Dynasty Minerals Ltd (NYSEAMERICAN: NAK) is having a pretty strong start to the trading session this morning. As soon as we were alerted to the gains, we started digging to see if we could find any news that had been released by the company. Nothing there… So, we moved on to figure out just why the stock is gaining, and we believe we’ve found the reason. Today, we’ll talk about why the stock is headed up, what we’re seeing from the stock, and what we’ll be watching for with regard to NAK ahead.
What’s Going On With NAK?
As mentioned above, as soon as we were alerted to the gains on Northern Dynasty Minerals, the CNA Finance team started digging to see exactly what was going on. However, there was no news released by the company. So, what could be sending the stock soaring if no news is out there? It all has to do with how shares are shorted and limitations.
Ultimately, in order to short a share of any stock, that share has to be borrowed from an investor that is long on the stock. Of course, mass-shorting of a stock can lead to declines, and in many cases, like what we’ve seen with NAK as of late, shorts can hold a stock down over a period of time. So, what’s going on in this particular case?
As mentioned above, in order to short a share of stock, that share must be borrowed from an investor with a long position. Ultimately, this limits the amount of shares that can be shorted to the amount of shares available for borrowing without restrictions. At the moment, NAK is hitting a key limit. The reality is that there are under 10,000 shares available to short on the stock. While this may sound like a pretty big chunk, with more than 4 million shares trading hands in the average session, the amount of shares that can be shorted at the moment is nothing but a drop in the bucket.
So, this means that the shorts don’t have control over the stock today. With so few shares available to shorts, if longs start to push, the stock is going to go up. That’s exactly what we’re seeing from NAK.
What We’re Seeing From The Stock
At the end of the day, while news is the general reason for market moves, there are various factors at play in the market. In this particular case, with few shares available to short, short manipulation can’t keep the price of Northern Dynasty Minerals down today. So, it’s no surprise that we’re seeing gains in the value of the stock. Currently (9:37), NAK is trading at $1.09 per share after a gain of $0.04 per share or 3.81% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NAK. In particular, we’re interested in following the shares available to short to see how long this shortage lasts and how the bulls take advantage of it. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks.
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