Practices in ManipulationMost us are well aware of the manipulation that occurs on Canadian exchanges. PTG isn't an oil company but the same practices are obviously employed by institutional traders:
Pulled this from the PTA board:
"Oil prices were trading at $94 per barrel at the start of 2014 and now trade for just over $90, which is hardly enough to warrant 30% to 50% declines."
"There has been a nearly hysterical sell-off in many oil stocks over the past three weeks or so. In my opinion, this is way overdone and quite possibly has been exacerbated by potential market manipulation from hedge funds and high frequency traders."
"Hedge funds and high frequency traders can easily take a mild pullback in oil prices and create a fearful environment for retail investors in which they see their small cap oil stocks going down in price, day after day. If you run a fund, you can easily pick a small cap oil stock that has experienced a mild and normal pullback and turn that into a massive sell-off that sets off fear-based panic selling and forced margin call selling. As we all know, selling often begets selling until the process reaches exhausted or capitulation-like levels. The best way to accomplish this is to start shorting a few hundred thousand dollars worth of stock (or more) in the target company every morning as soon as the market opens. When implementing this tactic in the first minutes of the market opening, a surprisingly small amount of money can be used to short a stock and immediately push it down 2% to 3% or more, and therefore set a negative tone for the day which many investors then follow. Furthermore, after setting this negative trend, a hedge fund or trader with an active interest in breaking down a stock just needs to repeat this on a daily basis for a few to several days in a row.
Hedge funds and shorts intent on pushing a stock down also need to follow up in the last few minutes of the market close by shorting more stock so that it closes weak, thereby further instilling a negative trend that creates fear for shareholders. After doing this for multiple days, beleaguered retail shareholders begin to worry heavily and wonder if there is some bad news that they don't yet know about. After seeing their stock drop day after day, many retail investors will be shaken out and sell out of fear or be forced to sell due to margin calls. Some retail investors who see the sudden downtrend in a stock often jump on board and also begin to short the stock. At this point, shorts have succeeded in breaking down the stock and in creating capitulation-like selling from which they see very significant profits. Once these stocks have reached bargain valuations and extremely oversold levels, it often pays to go long. These same hedge funds who may have shorted these stocks can later reverse the strategy when they want to profit from the rebound that oversold stocks often experience. Some investors who may have been sucked into shorting these stocks due to the downtrend caused by a hedge fund short attack, are now the ones at risk. Once a stock has experienced a high volume capitulation-like sell-off, the hedge fund can cover their shorts, then go long, then put in a buy order every morning that pushes the stock up at the open and sets a positive tone of strength. Of course, the hedge fund can also buy shares into the close thereby confirming strength at both the open and the close which other investors then follow. Using these methods, a hedge fund manager can profit from "breaking" the stock and from the subsequent rebound after reaching extremely oversold levels. Obviously, there are moral issues that make this type of practice wrong, but it would be naive to think it doesn't happen all the time. This is why "mom and pop" retail investors often lose the game to Wall Street "pros." How many times have retail investors been shaken out of a stock at or near the lows, only to see the stock then experience a sharp rebound?
Full article:
https://seekingalpha.com/article/2544605-really-scared-money-which-oversold-oil-stock-bargains-to-buy-now