NexOptic Technology Corp (OTCMKTS:NXOPF) Pullback Might Be A Discount Entry Opportunity

We put out this piece about NexOptic Technology Corp. (OTCMKTS:NXOPF) about a month ago. Since that time, the stock price has dipped a bit to $1.05. We received several emails from subscribers asking whether it was a good moment to buy. The fact is that nothing has been communicated by the company in April. Hence, if, in such a situation, the readers decide to initiate a position, this may be a better chance, as the company's products are the same, but selling at cheaper price. Take a look at the recent share price movement:SourceWhat happened in April?Liquidity issueThe amount of shares exchanged in April was very low as compared to the month of March. The company did not communicate anything this month and traders could not price anything new. Hence, the volume was lower, so it was the lack of liquidity that mainly drove prices lower. When the liquidity slows down, the market makers, most of the times, reduce the price to look for opportunity seekers. Market makers make money if there is volume in the market and look for volume at lower prices if they cannot find it at high prices. So, sometimes they can be quite unfair to long term buyers if the volume is low for some time. This may be part of the reason to explain the decline.Short sellers are piling upWe obtained, from this website, the amount of shares shorted in the market. Have a look:DateShort Interest% ChangeAvg. Daily Share VolumeDays to CoverSplitNew IssueApr 13, 2017549,94542.04527,9691.04NoNoMar 31, 2017387,18686.55582,9181.00NoNoMar 15, 2017207,55173.56245,5941.00NoNoFeb 28, 2017119,58613.61138,2171.00NoNoFeb 15, 2017105,25619.94150,8711.00NoNoJan 31, 201787,754616.01224,9011.00NoNoJan 13, 201712,256170.31165,9251.00NoNoDec 30, 20164,534-87.9253,3491.00NoNoDec 15, 201637,533138.61106,2051.00NoNoNov 30, 201615,7307,765.00214,7831.00NoNoSourceIn April, short sellers increased their stakes from 387,186 shares to 549,945 shares. In our opinion, they may have caused a big part of dip. Can this continue? If they hold more cash, they can continue selling for some months. However, the short selling business is quite risky, and we believe that they may liquidate the position soon, especially if the company puts out good news and there's a short squeeze.Why?Given that the company produces high volatility, when a new product or announcement is released to the market, short sellers know that the risk is high. We talked about the volatile moves of the this stock in our last articles:

"The company’s share price was trading around $0.2 in 2015. The chart price remained flat until 2016, when the price started to climb sharply. In the beginning of 2017, the price went from $0.6 to touch the level of $2.50 a few weeks ago. These are extremely volatile moves, thus we went to check the company’s announcements in order to understand what was going on."As the company announces more applications and uses, the share price should normally rise. This process may explain the recent uptrend in the share price." Source

Furthermore, the fact that the company has not communicated anything for a month, whereas it normally communicates a lot, increases the probability of having a new communication soon. The longer they maintain the short position, the riskier it will be. Short sellers are usually professional traders, who know this fact. If they remember well what happened in March, when the share price went from $1.5 to almost $3 in a short period of time.Investment forumsFrom time to time, we visit the Yahoo Finance forum to check what other traders, retail and professional ones, are saying about the company. In this case, everyone in the forum seems to agree with our thesis. In the next company presentation, the share price may jump again and short sellers may feel the pain again.ConclusionWe still believe that the product being developed is the key to this company. Additionally, we think that short sellers do not understand its future potential, which is the only reason to explain their behavior. Some traders are very reluctant to accept trading losses and sometimes have to lose all the money invested to do so. This company announced a new technology that made the share price jump from $0.25 to $3 in a very short period of time. Many long investors are still adding to their positions, so we don't know why shorts are piling up now given that a big part of the market believes in the technology. To sum up, nothing changed in the company apart from the activity of short sellers and market makers. We encourage investors to do their own research on the company, since it seems to be ready to surprise us and possibly make a major move to the upside. We will be updating our subscribers as soon as we know more. For the latest updates on NXOPF, sign up below.Disclosure: We have no position in NXOPF and have not been compensated for this article.