How the MMs are tanking our stocks and scaring people out of their positions and creating an atmosphere of fear in the OTCBB:
First of all, we have to understand how stocks move...
When a stock moves up, it is initially on buying (of course) by the investor or trader. As the price moves up those who bought first are in profit. Now depending on the strength of the stock, at some point, the early birds are going to take profit. The price falls, but only back to a certain level. Then at some level, buyers come back in and move the stock to a new high. This continues to happen until the stock is overextended and needs to correct.
Stock movement in an upward direction can be healthy or unhealthy. Stocks that spike upward are far more likely to tank than those who go through the healthy process of advances followed by pullbacks. This occurs intra-day and over longer periods of time.... quality stocks with healthy movements will typically move then correct 25-50% of the previous upward movement. EXAMPLE: If a stock opens sharply higher, I will place a limit order at 50% of the initial movement. If the stock opens the day and moves gradually higher, I will wait to see where a pullback and a base develops. I will then buy in that base.
At this time, these HEALTHY stock actions are seldom seen in the OTCBB market. Stocks move higher and the pullback turns into a crash. Why? Fear. And this whole thing is an ever tightening circle of Fear.
This is what is happening now:
A stock moves higher on buying... the MMs will move away from the ask and raise the bid to get sellers... so far, so good. The problem comes in when the first wave of sellers show up....
Process is as follows: The MMs know the sentiment in the OTCBB now. They will all pile up on the offer at some point. It will take an ENORMOUS amount of buying to get through this gauntlet and they know that this is not very likely to happen with investor/trader sentiment running as low as it is now. At some point, people see that the buying is still coming in and the stock is not moving. Those who got in first start selling... the MMs then rapidly drop the bid. The MMs start buying the stock back at this drastically lowered price. Here is where they really are hosing us:
The ask is (for example) .50, the bid went as high as .48, the first seller sells at .48... this trade is posted and obviously shows up as a sell. The MM who bought the stock back at .48 also posts the trade. ... now we have "two sells" IE... they are posting buys by individuals once and posting the bid trades twice... once by the individual seller and again on the MMs buy.
Continuing... the bid now falls to .45 and another sell goes across... sometimes these MMs are buying the stock back at the .45 then posting their buy (which looks like another sell) then will turn around and sell the .45 stock to another MM to show yet another sell. Now, for the average person, this looks like an avalanche of selling. This fosters the fear and everyone runs for cover as the MMs run the bid way down to add fuel to the panic. The price often falls to BELOW where the stock started the day at. The buyers DO NOT return because the stock did not pullback... it crashed. This leaves the stock with lots of resistance in it in effect ruining the stock for months maybe even years to recover.
Posting trades twice or three times is not a big deal... it happens in good and bad markets... but you see... it works negatively both ways... when MMs post their offer side trades it looks like lots of buying coming in and brings the GREED into play by getting people to jump aboard the rocket. The FEAR comes in with the first seller. We all know the bid falls away a hell of a lot faster and on far fewer trades than the bid moves up on.
Another thing these EVIL MMs do is: When a stock is under buying pressure, they will lift the ask but not the bid... eventually the bid comes up, they get their sellers and then tank the bid. On thinly traded stocks with small floats, the buying comes in and the stock moves rapidly up, both on the bid and ask side... then when the MMs get enough sellers they drop the bid so low that they effectively halt trading... they have all the time in the world... no one is going to buy a stock at .375 X 1.00 and eventually you get tired of having money tied up in this stock and you sell.... they make a huge profit.
We need an Anthony@Pacific for MMs... time to stop hammering the companies and go after these brokerage firms.
Tom |
