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10 Signs Your Stock is Being Manipulated

[RandomMaker]

10 Signs Your Stock is Being Manipulated

Feb 11

Written By David Stone

Disclaimer: This post does not constitute financial advice. Author has a long position in Gilead. Do your own due diligence before making an investment.

Modern day investing (at least in the short term) has become totally distorted by Wall Street manipulators.

You can spend weeks analyzing financials, company management, and growth prospects, determine a business is fantastic, only to watch it slowly disintegrate.

Your stock just keeps dropping.

And dropping.

And eventually you sell.

A year later you check in on the stock and see that it’s doubled, tripled, or gone parabolic.

This isn’t bad luck. Wall Street manipulated your stock and stole your shares.

They know you check the price every day. They know you get angry when you see it dropping for no reason.

It’s all part of their psychological manipulation toolkit. This has become much easier with the invention of the internet and social media. Decades ago, manipulators had to publish hit pieces in the newspaper. Now all they have to do post a few comments on a stock message board. Decades ago, they had to come up with elaborate lies worthy of being published in a reputable newspaper that investors would take seriously. Now all they have to is make an account like SuperBullishInvestor, and post a comment like, “This stock is poop. Glad I sold it.”

The only way to protect yourself against this manipulation is to learn how to spot it. Here are 10 ways to recognize if your stock is being manipulated by hedge funds and Wall Street parasites.

1. Your stock is disconnected from the indexes that track it.

Without any new developments, most stocks will drift upwards. This is due to inflation, and growth. Humans create stuff. We go to work every day and create value.

Watch the indexes that hold your stock. If they’re going up, and your stock is going down, then someone is selling, or more likely, shorting it.

This causes you to become frustrated as you watch other (possibly worse companies) go up in value, while yours lags behind.

The more frustrated you are, the more likely you are to sell.

 

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.

Now, ask a second friend the same set of questions, but change the age from 50 to 100.

Odds are the second friend will give a number closer to 100.

4. Your company is trading near its cash value.

Say the company you’ve invested in has 5 billion dollars in the bank. You look at the market cap and notice that it’s only 5.5 billion.

This means the market is only valuing your company at half a billion.

Is your company going bankrupt?

Is their revenue plummeting?

Are their growth prospects terrible?

No?

Your company is being manipulated.

A company should almost always trade significantly higher than their cash value.

5. Bad news shaves off more market cap than it should.

Okay, so your company had a bad beat. A promising drug in their portfolio failed a phase 3 clinical trial.

Now you have to analyze how bad this is.

What were the projected sales of this product?

How big a hit is this?

What often happens with manipulated stocks is they drop a lot more than they should when bad news is released. Manipulators know you’ll be upset, so they’ll hammer the stock as hard as they can.

Say your company was worth 85 billion yesterday.

Today the bad news drops, and your company is down 10%.

That’s a market cap loss of 8.5 billion.

Ignore the bearish sentiment and do some analysis. Is a drop of 8.5 billion warranted? If the product that failed was only ever projected to bring in 2B total at its peak…then the stock is being manipulated.

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.

But it’s not. They hide it by covering their short position before the day is over.

So, if you notice a large amount of volume before the end of the day, or right at the bell…some of that volume is the shorts covering their position so they don’t increase the overall short interest and draw the attention of investors/short squeezers.

10. Total confusion of fellow investors.

You’re not the only one invested in this stock. Hundreds or thousands of other people just like you have done research on this company. They invested for similar reasons that you did. They see the growth potential, or they recognize how undervalued it is.

But the stock keeps dropping. You can’t figure it out, and neither can they.

If none of your fellow bullish investors can figure out a plausible reason for the stock to keep dropping day after day…then it’s probably being manipulated.

Listen to what others are saying.  If they’re presenting a coherent argument for the stock’s decline, backed up by data and a reasonable thesis, that’s different.

But if your fellow investors are as bewildered as you are by the stock’s movement, then your stock is probably being manipulated by Wall Street parasites.

An unmanipulated market is a rational place. It follows the laws of supply and demand. Wall Street distorts these markets by faking supply (dumping shares), faking demand (pumping garbage), and faking sentiment (posting fake comments.)

If you’re investing for the short term (less than five years) then you must expect these shenanigans.

They aren’t going away.

Buy, hold, and don’t look at it.