PUMP & DUMP vs SHORT & DISTORT
Pump & Dump we are all aware of if you have any trading experience at all. But very little has been written about the “other side of the trade” or it opposite, which is its counter part “Short & Distort.” I will deal with two stocks that I have done enormous DD on so I can show the clear example of each of these stock manipulation tactics.
Lets take a look at a classic stock, which was not slammed on bit… MIDL. Why was this? It followed every rule to the letter of a “Pump & Dump” but not one know short slammer showed up to distort the stock or doing the infamous “Short & Distort” routine. The reason I feel is because the shorters had a no-risk short set up for them already in the stock structure… “Arbitrage.” The shorters did not care what was said … as a matter of fact, they did not want to kill the momentum based on the facts of the company because slamming the stock took out the no-risk advantage for Arbitrage. If a stock has more than one security such as Preferred or warrants, the shorters have a no-risk shorting scenario by selling one security against the other. Even known shorter will defned the stock story to the maximum because arbitrage is feed by a positive story.
Now lets look at another stock quite similar but entirely different. What are the similarities & differences in accordance with know established rules that are warning signs for the small investor ….
MIDL … New technology for and ethanol fuel additive
ORXX… New technology for recovering gold from hard rock
MIDL … revolutionary replacement for MTBE which was getting banned (Quite real)
ORXX … revolutionary replacement for Cyanide which was getting banned (untested)
MIDL … fully reporting shell which was reverse merged into.
ORXX … Non reporting shell which is about to be reversed into.
MIDL … Warrants, Preferred and common stock (Arbitraged)
ORXX … Common stock only
MIDL … Never slammed by an organized collective known shorter group
ORXX … Slammed daily by an organized collective known shorter group
MIDL … no distortion or convenient logic or wisdom
ORXX … Fraught with distortion, convenient logic or wisdom
MIDL … Classic Pump & Dump
ORXX… Classic Short & Distort.
Now lets take this and apply it to the rules of Pump & Dump for stock manipulators … In order to make these market manipulations work, the professionals assume: (a) The Public is STUPID and (b) The Public will mainly buy at the HIGH and (c) The Public will sell at the LOW. Therefore, as long as the market manipulator can run crowd control,
he can be successful in their agenda of stock manipulation by controlling the market's greed and fear.
STAGES FOR THE DEADLY ART OF STOCK MANIPULATION
Stage 1… The Acquisition of shares.
Please note: all sharp price movements, whether up or down, are the result of one or more, usually a group, professionals manipulating the share price.
PUMP & DUMP = (Loading) Manipulators after acquiring their shares leak information and pump the stock to get buyers silently. This leads to front loading also.
SHORT & DISTORT = (Unaware) Monitoring spikes in volumes on stocks with no rumors.
Stage 2: The Promotional Campaign!
Note: this is designed to spread a rumor/story to play on the emotional greed of a pie in the sky find. It begins to spread across the financial world. Joe public rushes in not to miss the next gold rush.
PUMP & DUMP = (PUMP/Greed) Newsletter writers are hired -- either secretly or not -- to cheerleader a stock. PR firms are hired and let loose upon an unsuspecting public. Contracts to appear on radio talk shows are signed and implemented. An advertising campaign is rolled out (television ads, newspaper ads, card deck mailings, e-mails, etc.). The company signs up to exhibit at "investment conferences" and "shows" (mainly so they can get a little "podium time" to hype their stock and tell you how "their company is really different" and "not a stock promotion.") Funny little "hype" messages are posted on Internet newsgroups. BTW the more, the merrier. 1000% returns are projected..
SHORT & DISTORT = (Patient) Flags this run up scenario and the campaign then just sits back and waits patiently for the silent period or another words the stock to become thinly traded..
Stage 3: The infamous DUMP!
PUMP & DUMP = (DUMP) Carefully the once low volume that caused a bit of a spike suddenly stalls as the volume increases. The stock manipulators sell out their positions in to the promotion buying campaign.
SHORT & DISTORT = (Preparation) Flags this run up scenario and the campaign then just sits back and waits patiently for the silent period or another words the stock to become thinly traded. Distortion of the rumors and the company are researched.
Stage 4: The Silence or News Vacuum!
PUMP & DUMP = (Silence) No more news or insiders leaks of information to pump the stock to get buyers. The front loading sells out. The silence plays on the emotional fear of being hoodwinked. Negative opinions begin to spread across the financial world. Joe public sells out to cut their losses. The really slick market manipulators would even seed the Internet news groups or other journalists to plant negative stories about that company. Or start a propaganda campaign of negative rumors on all available communication vessels.
SHORT & DISTORT = (Short) The shorts step in selling on every possible up tick. Reverse of front loading by the way. Preparations are made to attack the guy who had earlier written positively about the company and take out, discredit, any new long-term champions or messengers.
Stage 5: The Distortion!
PUMP & DUMP = (Gone/Waiting/Shorting)
SHORT & DISTORT = (Distortion) The shorts step in increase selling on every possible up tick. Just as with the pump, newsletters, e-mail, PR firms against P & D, etc. are simulated. Expertise in the field is recruited for credibility. Any possible twist using POS (Purposely Omitted Syntax) and PAS (Purposely Added Syntax) is conveniently used on every possible angle. If the POS/PAS is discovered then attack the messenger. Above all control the message boards. The group clutters the message boards so no positive information can be readily found. Justification is the “Value of the Company” in the market. Projections of $0.00 worth and loss projections of 100%.
Note: The market manipulator will do everything in his/her power to keep buyers OUT OF THE STOCK. Cut your losses is touted to stimulate fear. You bought higher now they need you to sell lower.
Stage 6: The Accumulation!
PUMP & DUMP = (Gone/Waiting/Buying) If the manipulator sees an opportunity the stock is on the floor and not part of the Short & Distort campaign they will begin buying back in slowly accumulating. As the Shorters were shorting first manipulator was selling, so it goes the other way. Buying to put pressure on the shorter to cover. Accumulation by new investors and averaging down of old investors are leads to the pressure on the short.
SHORT & DISTORT = (Pressure) The shorts have taken it too far. The volume is increasing and the price is not effectively dropping. A stalemate occurs. Personal attacks increase. Threats of legal action, SEC involvement, and yes even death threats increase. Increased secret IDs are employed to increase the cluttering, personal attacks and the distortion. Pump and Dump is fraught though out because the pressure is increasing. So begins a string of lies that run for as long as one's stomach can take it. Desperately playing on the "you have been had" scenario. Any news the shorters hit it hard to kill any interest.
Note: Watch the volume not the share price. A market manipulator will have various brokers buying and selling the stock to give the APPEARANCE of increasing volume but the price goes down. Thus stimulating the story the company is selling or an off shore reg S or other convenient scenario. Watch for large blocks that show up but have a MM special code, cross overs, etc.
Stage 7: The Cover.
Note: An unexpected news release or too much buying pressure causes the price to start back up. Final attempts are made to stall the momentum. Kill the news is the ultimate goal and attempt to short and weather the storm.
PUMP & DUMP = (Gone/Waiting/Buying) Silently the manipulator sees the pressure increasing on the buying and accumulates more. New investors come in on the anticipation of a turn in the stock…
SHORT & DISTORT = (Run Up) Without warning the pressure is too much and the short begins to cover. Buy on top of new investors coming in the stock sky rockets. Now the shorts starting bashing the positive posters for Pumping and dumping.
Now the whole thing can possibly start again. Just a vicious cycle sometimes.
Note: the “Pump & Dump” I have seen is investigated by the SEC most of the time where the “Short & Distort” is not apparently high on the SEC's agenda and as a result rarely shows up in a civil case. The short, unlike the dumper though, has an unlimited loss factor should the stock price go up.
Remember this is just my personal opinion. Check with a licensed financial professional on all matters of the stock market.
GB
|
