In an early post during trading hours I said I would post some infirmation about stock manipulation games the small investor can't play and how "shorts don't just short and also go long to make a profit. The trick is NOT TO DO WHAT THEY WANT YOU TO DO !
Manipulating stock prices legally is actually fairly easy.
The problem for individual stock investors is they don't have ready access to these techniques and, consequently, often end up on the losing end of these schemes.
Here's what happens, although there are many ways to accomplish the same result:
A big institutional investor (hedge funds, mutual funds, insurance companies, and so on) picks a stock that it owns and begins selling.
As it dumps the stock on to the market, the price begins to fall. Other investors unload the stock and the price continues to fall.
At some point, the institutional investor decides it is time to jump back in and it begins an aggressive buying program. Soon, other investors notice the price rising and they buy also pushing the price up higher.
Once the price is sufficiently high, the cycle can begin again.
What has happened is the institutional investor through its purchasing power can drive prices down and then buy back into the stock at a low price.
It rides that price up as others join the rally and pockets a hefty profit.
This is called the slingshot effect and was described in a much-quoted article back in 2009 by Jason Schwarz. He was referring specifically to Apple stock.
However, this happens with other stocks too.
The lesson for the individual investor is to never count on short-term gains in a stock, because those could evaporate for no apparent reason. If you have a good profit in a stock, take some off the table by selling part of your holdings.
This way if the stock is used in a manipulating scheme or something else happens that causes the price to fall, you have captured part of your gains and avoided some loses.
The fact that naked shorting exists makes any statement about supply and demand in the market meaningless.
Also, the HFT micro-crashes on this stock with in 2 to 3X average daily volume in 20 minutes makes any statement that manipulation does not happen wrong.
Great post. Thanks for taking the time to put it on the board. And how are you doing Super? Did you already have that procedure? Can't remember when you said you were going in. Hope you are having a nice summer.
And how are you doing Super? Did you already have that procedure? Can't remember when you said you were going in.
Thanks for asking midhashid. After having my first Cardic Ablation 1/17/2013 at UPMC (University of Pittsburgh Medical Center), which is the 8th best hospital in the U.S. according to USA Today, but things when south, so I asked Doctors, Nurses, and worked the Net to find the best hospital for treating A-Fib and A-flutter. I found out that Cleveland Clinic was first, the Mayo-Clinic was second. Then I needed the best doctor in the Cleveland Clinic Cardiac Electrophysiology Dept. He saw me but wanted to have an associate take care of me because he had a waiting list 2 months longer than the other 14 doctors. (Gee, I wondered why!) That sealed the deal so I have waited 4 months to see him and next Tues the 16 he does his work on me after a battery of test on Monday. If everything goes right it's only a 2 day stay in the hopital and I should be home in Pittsburgh Thursday.
I was scanning the Walmart online store and was a little surprised by all the VTECH tablets displayed and very little LeapFrog products. Looks like VTECH has cut prices and are ready to go head to head with us. Remember VTECH failed last year to win the battle and people put their trust in the American company, LeapFrog! Good Luck to all Longs!
Thank you Super6. Much of what you say is what I suspected. There would seem to be no other reason for this stocks erratic behavior at times. Think there might be any collusion between hedge funds? Or would one larger fund be able to do this alone? I hope your health is good! Please disregard that thumbs down...I'm om my iPad and tried to give you a thumbs up but apparently missed.
Two things I might add are the shorts are buying not just at the low but on the way up to set up a "buying panic" and overdrive the PPS so they can "short" again at the top.
The second thing is, I don't agree the aveage investor should be trying to time the market and selling, just buy an hold and don't worry about the PPS falling for no apparent reason.