Why GSX's Breakout Might Not Last
Updated
- This post is for educational purposes only. Do not buy or sell this stock based upon this post, but only after performing your own due diligence on the company -
Disclosure: Writer of this post has a net short position on GSX.
Fundamentals:
I believe that GSX's breakout over the last past week above $46.5 was driven by a massive short squeeze and participation by foolish retail traders/investors.
GSX currently has 3 research firms calling it a massive fraud. Feel free to google and do your own due diligence on the reports that have been posted by Grizzly Research LLC, Muddy Waters Research LLC, and Citron Research.
There are class action suits from at least 4 different law firms (from what I have found) all stating that GSX has misled investors and that GSX has been fraudulently boosting its Teacher qualifications, student counts, and revenue.
Technical Analysis
When price broke out past $46.5, there was most likely a massive short squeeze, that caused a bunch of investors to cover their positions, causing the upsurge in price. I believe that this was further driven by retail investors who had done little research on the company, and bought it because it went up dramatically, and failed to consider the true risks of this company.
Disclosure: Writer of this post has a net short position on GSX.
Fundamentals:
I believe that GSX's breakout over the last past week above $46.5 was driven by a massive short squeeze and participation by foolish retail traders/investors.
GSX currently has 3 research firms calling it a massive fraud. Feel free to google and do your own due diligence on the reports that have been posted by Grizzly Research LLC, Muddy Waters Research LLC, and Citron Research.
There are class action suits from at least 4 different law firms (from what I have found) all stating that GSX has misled investors and that GSX has been fraudulently boosting its Teacher qualifications, student counts, and revenue.
Technical Analysis
When price broke out past $46.5, there was most likely a massive short squeeze, that caused a bunch of investors to cover their positions, causing the upsurge in price. I believe that this was further driven by retail investors who had done little research on the company, and bought it because it went up dramatically, and failed to consider the true risks of this company.
Note
Muddy Water's Carson Block has reiterated that his short position and analysis of GSX still holds, and that the reason for the recent surge in price is due to "technical reasons". These comments by Block reinforces my thesis that the breakout above $46.5 was due to a short squeeze, followed by trend traders pushing the price up. I am a user of both technicals and fundamentals when I trade and invest. And in this case, technicals are simply not telling the whole story.
If you're still short, consider holding on...I am more confident than ever that this short will turn profitable.
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