Lets be clear. Shorts can't drive share prices down, other than talking trash on these bb's. But when management is negative (as ALY's management has been) it is a wonder the share price has held as well as it has. ALY sp has weathered the worst, time for a change of direction. [slim]
WRONG, the shorts can drive a stock down. All they have to do is meet all the bids and there won't be any upward pressure. The stock will just sink and sink. It all depends on the amount of shares they are willing to short.
When they cover --they have the effect of raising demand. It is rather simple.
It is my theory that sellers drive the price up as they short it and the buyers are the the ones who drive the price down. What buyer wants to buy at a high price...none except the inexperienced ones. And what seller wants to sell at a low price...none except the inexperienced ones. So in essence, the shorts are sellers at the higher prices after the buyers bought up most of the available shares at lower prices and this buying pressure moves the prices as the shorts start selling at higher and higher prices until the buyers (inexperienced) stop buying. The shorts are driving the price high by selling higher (the shorts are in action, not the longs). The buyers drive the price low by not buying because a smart buyer buys low and there are fewer inexperienced to buy at these higher prices. The buyer are in essence buying back the shares the shorts sold at higher prices and they are also buying the shares that some (inexperienced) longs are jumping off after buying too high and the prices dropped to low for their stomachs (been there!). So they are driving the price lower by buying lower (the longs are in action, not the shorts) until, again, available shares are exhausted and the cycle starts again.