Joe Friday

Earnings Will Sink Blue Nile's Stock

This is indeed a highly manipulated stock. It does not trade on valuation. Nobody in the market could possibly justify the purchase of this stock on any valuation metric (which begs the question...why are the institutions holding it?)
The key here is float analysis. The total share issuance is 14M.

According to Yahoo, 126% of all the shares outstanding are held by institutions and 3% are held by insiders finance.yahoo.com/q/mh.... I am not sure how this is possible, and it may not be entirely accurate, but it helps explain the manipulation. There is virtually no truly free float for the retail investors.
The total number of shorted shares is now 2.7M. But, it is important to note that during the run from 20 in March to 66 last week, the short position declined from 6M to 2.7M. With the float as tightly tied up as it has been, each bump in price has caused more and more weak shorts to cover (margin calls), and it has been hard to borrow, adding more short squeeze fuel. The short squeezes combined with the tight float has forced the price higher and higher. If you watch the trading in this stock you will note a tendency to have it run up in the early trading based on the margin calls and borrow calls from the previous day.
The tight float is indeed a two edged sword, however. Any large holder that trys to exit will drive this down very quickly. Nobody reallly beleives this stock is "worth" 65. The question the institutions need to grapple with is how do they exit and get their hands on the mirage value. In addition, the 3M shares that have covered are all waiting on the sidelines hoping to get in for the ride down...Any combination of selling of any size from those burned shorts or any one institution that trys to exit will burst the balloon.
The question is when will that happen, and can the shorts still holding wait until it does.

"the market can remain irrational longer than you can remain solvent" .. I believe the quote is attributed to Bernard Baruch.