The basic situation with made up numbers:
2 weeks ago: Superior Auto is a company that trades at $30 per share. They sell about 40,000 sets of aluminium wheels and 15,000 sets of steel wheels a month. Axe Capital thinks this company is worth more than $30 per share so they buy 200,000 shares ($6mil investment).
1 week ago: Numbers started coming in from factories that produce for Superior Auto, and the numbers show a sharp rise in production of aluminium wheels. This month Superior Auto produced 70,000 sets of aluminium wheels, and only 8,000 sets of steel wheels.
6 days ago: People on Wall St caught wind of the change in production. They expect it means that Superior Auto based on sales data has seen a sharp rise in demand for aluminium wheels, and that the people who buy aluminium wheels like Superior Auto's brand. Based on this the stock price goes up to $33 per share (Axe's investment is now worth $6.6mil).
Today: Trader A (long guy) has been looking into the auto industry and firmly believes that it's a great sign for the company and that future numbers will only confirm this and therefore send the stock price even higher. He says keep the investment of 200,000 shares. It will go to $37 on their earnings release, netting Axe Capital an additional $800,000.
Today: Trader B (short guy) thinks Superior Auto may have been overexcited and that they won't be able to sell 70,000 sets of aluminium wheels, and there is going to be demand for steel wheels that they can't meet and therefore their competitors will get some of their customers. A great way to test this hypothesis would be to see the inventories at Superior Auto's main warehouse, but there is no way to legally do that before other investors. He knows that normally there is around 10,000 sets of aluminium wheels and 4000 sets of steel wheels in the warehouse on a day like this. He pays the warehouse manager to show him the inventory and notices that there is 35,000 sets of aluminium wheels and 700 sets of steel wheels. This confirms that Superior Auto made a grave mistake, so their business will be hurt and the $3 increase in price was based on false information so it will disappear as well. He says sell the 200,000 shares and additionally borrow 300,000 shares from someone else and then sell those shares in the market as well! It will go to $28 on their earnings when people see their actual inventory levels and sales revenue figures, netting Axe capital an additional $1.5mil.