Well, as with anything that can be traded, the price of stock is determined by its supply and demand. As demand increases the price rises and visa versa. Contrarily, as the supply of stock for sale increases the price declines and visa versa.
So, let's say you have ten million dollars to put towards shorting SKUL at a minimum price of $15. You'd need to borrow 666,667 shares and sell them on the open market. You obviously can't sell that many all at once, you would need to stretch it out over many days at least, because aggressive selling would put too much supply into the market and the price would fall below $15. And of course you don't want the public to find out your intentions because then demand would decrease and the price would fall below $15. So, you may have to buy some shares at $15 once in awhile to support the price; encourage demand. What I've just described is a distribution trading range. It applies equally to outright sellers of large quantities. The key is that it happens at tops and on the way up to tops when demand is heavy and it is easy to sell large quantities.
Does the above fit the situation now? Is the big money/smart money selling and/or selling short now?. Probably not, unless this is a re-distribution which is not likely since the average short entry price is $15.96 (a 50% gain at current price) and since the price is less than 8 times future earnings when a slow grower like Koss is selling at 12 times earnings. No, I think the big-money-, the smart-money-shorts, have been buying to cover heavily from the time it dropped under the $12 support level when the supply of stock for sale was high. And similar to when they were selling short and they had to support the stock, now they have to defend resistance, keep it from exploding higher by occassionally selling stock, but the aggregate intent is to cover; to buy. They drop it in the morning to illicit some fear and disgust to get the public to sell to them the rest of the day. At some point it is going to get away from them because of the dumb-money shorts who got in late who will take profits and be fearful of losing on a winning trade. Then there will be an automatic rally, some preliminary demand caused by dumb-money covering; a good bounce that the smart-money shorts won't want to absorb/defend until the demand drys up. Then it should enter into a trading range; an accumulation trading range defined by the low and the automatic rally high yet to come.
So, where is that low where an automatic rally will start? I don't know. Maybe it'll take some final capitualation where the last of the spec longs gives it up and throws in the towel. Many here have already done that. With today's low the C to D (14.58 to 7.70) has now extended the A to B (16.75 to 11.84) by 140% and it printed a bullish hammer handle candle on the daily chart. Maybe this is it. I'm in at 8.35 so I'm not ready to throw in the towel yet.
That 140% extension I mentioned is exact. The 1.382 Fib extension (138.2%) was at $7.79; we hit a 7.70 low. So, a logical bounce level was hit based on natural market harmonics and it closed above it on light volume. it may very well hold.
In an earlier post I described what I think is the key way it lowers price. It forces there to be more shares held long. Therefore, you need "more believers" willing to step up. This is a potential drag on the stock price.
Here's the kicker. I believe that a new paradigm has emerged, where short sellers simply identify anything they think is "faddish" or "unsustainable" and will build and hold a short position much longer than one typically would. This is because there have in fact been quite a few companies that have gone public that fit this mold. They want the scenario to play out and are "unafraid" of other shorts stealing their profits. Groupon could be a great example. Under the "old paradigm" one would be more likely to cover and lock in profits, thus creating a counter balance. With the new way of thinking, shorting can potentially weigh much heavier on a stock once negative sentiment kicks in. Without a doubt if SKUL can truly disprove the non-believers a short squeeze will happen eventually. But it is really hard to scare the shorts as we have seen.