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Jammin Java Corp. Message Board

  • pawsitivelynatural pawsitivelynatural May 2, 2011 5:56 PM Flag

    The last email I received was 4/15

    Here is a snippet of the email I received. I did watch the stock but I did not see any short covering within that 5 day time frame.

    From a $1.95 high it sharply pulled back to $1.25

    Unusual?

    Yes.

    And there is a peculiar reason why it happened...

    Market-Maker Manipulation

    What happened is fairly common in the world of small caps.

    Market Makers can short sell sto.cks with one caveat...

    They must buy back (i.e. cover) their short position within 5 days.

    Here's an example of how it works...

    A market maker short sells and ends up selling 4m sha.res at an average price of $1.80

    The market maker is hoping to buy back those 4m sha.res at... say...

    ... A $1.40 average and capture the $0.40/share gain.

    This happened to JAMN on Wednesday.

    And it's the reason the pullback was so sharp.

    The market maker specifically sold as much JAMN as they could in the shortest possible time frame.

    Reason #1

    The market maker has 5 days to buy
    back every single sha.re they sold short.

    That's mandated by law.

    No exceptions.

    Which means it is GUARANTEED that there will be HUGE buying of JAMN over the next 5 days.

    Reason #2

    But it gets better...

    Market makers do not like to hold these huge risky positions for the whole 5 days.

    In fact they usually like to cover their position the very same day.

    So I believe most of the market maker covering will come in today and Monday.

    Reason #3

    But it gets even better...

    I suspect as huge rushing buying pours in at the open today...

    The above email was sent to me on April 15th and as you can see by the chart, the short covering never took place within that 5 days so now as I'm re-reading this, I guess everyone who bought in today was just part of the p&d.

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JAMN
0.19+0.01(+5.56%)Dec 19 3:47 PMEST

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