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Stock Manipulation

Posted by Satuki On February - 7 - 2010

There are different types of stock manipulation in the stock market.  Penny stocks, small cap or even some mid cap stocks are prone to manipulation. The Chinese stocks are the worst.  Let’s take a look at TSL(Trina Solar Limited).

 

TSL was one of the strongest bulls during the recent run. The performance of other solar guys such as FSLR( First Solar, Inc), LDK (LDK Solar) or STP (Suntech Power) was very pathetic during the same period. There must be some reasons behind this run.  However, if you look on the Internet, you can hardly find any concrete evidence to support this run from 4 to 31( 8 t0 60 before the split).

 

Why was this guy so special while other solar stocks were pinned down by the overall weak solar market? It was the split.  Technically speaking, a split does not make a share holder any richer. But a stock split is normally regarded as good news for a company becuase only decent companies can afford a split.   Poor companies do reverse stock split.

 

So a split normally carries a very favorable market sentiment toward a company. But how the hell could an average Jane or Joe like you and I know this in 2009?  The split news hit the wire around 1/06/2010. Here it is from thestreet.com http://www.thestreet.com/story/10656574/trina-solar-to-split-stock.html .

 

Nevertheless, some people must have known this way ahead of the time and ran the stock up. The SEC is basically powerless in dealing with this kind of manipulation.  Do not blame the SEC though because it is extremely hard to gather concrete evidence. Let alone a Chinese company.

 

Click on the image to have a better view

 

Having said that, I personally do not mind this kind of stock manipulation (penny stock pump and dump excluded) because it adds liquidity and opportunities for us. It took quite a few months for TSL to run from 4 to 31.  If you are a trend follower, you would have plenty opportunities to make some dough in TSL.

 

TSL is just an example.  As for the stock itself,   the swift 30% reaction with huge volume tells us that It has lost the momentum and might face a prolonged consolidation from here.  You can see a bunch of similar stocks such as STEC and MED(Medifast), both of which are dead from a bull’s perspective.



Now, let us watch two vdeio clips from the movie Boiler Room. which talks about how people manipulate penny stocks. It is basically pump and dump. Rent it if you have not seen it. It is one of my favorite movies.

 

Disclosure:   No positions in any stocks mentioned in this post.


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Most Commented Posts

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  • yogii291
    IF someone just looks around and study different business and there profits returns you will notice that a 10 to 15% return a year on assets is a great deal. After you pay the employees and for equipment. Go any place in the world and try it. When the housing market was full swing, it appreciating close to 20% a year. Only after 4-5 years of that we had the biggest bubble of the human race. So if someone says he can do 20% a month, he is next to god. Or maybe I am completely wrong.
  • Well said. He is perhaps a newbie who had a lucky good year and thinks he can do that year over year. It is possible to have a triple digit year. But to do that year over year is absolutely not sustainable. I have seen people try to get their 15k to 150K in a year. That is why a lot of traders fail. They are just not realistic.

    Apple's return on equity in 2009 is 23.25%
    Google's return on equity in 2009 is 16.11%
    Intel 's return on equity in 2009 is 10.82%
  • gimmeabreak
    I don't think I'd be bragging about any of your "performance." It's pathetic. I can knock down 10K per month on 50K and you brag about 3% on 3x that? What a waste of bandwidth.
  • Tony
    Are you saying that you could make 20% per month, every month and every year(250% per year)? Madoff claimed only 10-15% per year if I remember it clearly.

    BTW, could you please tell me how long you have had that kind of performance? A month, A year, 2 years, 5 years or even longer?
  • I think he was implying 240% year over year. He perhaps thinks everyone here is stupid or something. He has much to learn from Madoff, who was indeed a BS artist. He is thousands of miles away from that. The fact that a lot people flagged his comment shows most do not buy that kind of BS.

    I was going to delete that garbage. But I decided not to since only a very small number of newbies would believe him.
  • Jake
    Madoff would not be sitting his ass in Jail if he had told people that he could make 250% a year consistently because no one would have believed him.

    That is why he was a con artist.
  • Tony
    Did you mean Madoff was a super con artist?
  • Your talk is cheaper than a penny. To prove me wrong, you can show us your trades in real time. Post every single one of them on Twitter,which will generate a time stamp for all your entries. A claim should be backed up by concrete evidence, or it is just BS.

    I am shooting for 30% per year without compounding and draw-downs.
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