RE:Good read on manipulationIndeed, we check this list.
2. Nonsense negativity on social media.
There are two different types of negative posts. The first is well thought out negative posts that show why a company isn’t doing well, or isn’t going to do well, usually backed up by data. These are fine. Usually posted by real people. Some companies are bad, and they rightfully deserve to tank.
But the second type of negative post is one like: “This stock is garbage!”
This is nonsense.
These are posted by paid manipulators or inexperienced investors frustrated by the direction of the stock price.
You can ignore these. Just mute the accounts and move on.
3. Price targets by random users that are far below the current price.
Manipulators are using what’s called the anchoring effect. If your stock is currently at $70, they’ll say things like “I’m a buyer at $50.” This causes you to question your investment thesis. Did you get in too early? Is bad news about to drop?
Your brain becomes attached to the 50 number. There’s science to prove it. You can even test it with your friends. Ask one friend if he thinks Abraham Lincoln was older or younger than 50 when he died. Then ask that same friend at exactly what age do they think Lincoln died. Odds are they’ll give a number around 50 due to the anchoring effect.
6. Your stock is red all the time for seemingly no reason I call this the Triple Red Attack. These drops tend to be smaller. Usually between -0.05% and -1.5%.
They sell enough shares to keep it red during the pre-market. During regular hours they’ll nuke it as much as 2-3%. Before the day is up, they’ll often let the stock recover a bit. This is so they can paint it red after hours. It also allows them more room for it to drop tomorrow.
It forms this type of pattern. This was taken from a six-month chart of $GILD. But if you look at most one-day, or one-week charts, they share a similar pattern.
You see, manipulators can only smash a stock so hard. They can’t nuke it 5% a day indefinitely. If they bash it too hard, then they’ll let it recover to reestablish positive sentiment. Then the Triple Red Attack starts over again.
Wall Street’s goal is to destroy a stock just enough to frustrate retail investors, but not enough to attract the attention of regulators, or serious value investors.
Their goal is to get you to sell and go buy index funds.
7. Your stock is trading near its floor.
If your company is generating revenue, has lots of cash, and great growth prospects, then your stock has a floor.
Gilead Sciences, for example, traded as low as $56.56 in December 2020. This was totally ridiculous. At the time it had a market cap of about 70B.
Gilead generates about 24B/year in sales with margins of 85%.
Comparing revenue to market cap is a great method of identifying undervalued stocks. How many years does it take your company to pay off their market cap with sales? The lower number of years, the more undervalued the company.
8. Every pop is being shorted.
Your stock released some good news. The market is up. Everything is running. But not you.
You open up the 5-minute chart and look at the trends over the last week.
You notice that every time your stock starts to climb, it’s immediately slapped down again. Often with less volume than when it started going up.
They do this to discourage you. Wall Street knows that retail investors pay a lot of attention to the daily movements of their stocks.
9. High short volume, low short interest.
These numbers must be reported accurately to financial regulators. They can’t hide the overall short interest in the long run. But what they can do is cover their short before the short interest is reported.
This becomes obvious when short volume is high, say 45%, but total short interest is low, say 3%.
If 45% of a stock’s volume is people borrowing and selling, then you’d expect the total short interest to be huge.