Found this article, good reading for newbies, and to remind
us all from time to time. It's by Ga Bard, and the dimi group placed it on their web site..
Pump & Dump Scheme vs Short & Distort Scheme
This interesting article uses stages to
help explain not only the stages of the
highly publicized PUMP & DUMP scheme
but also the stages of the lesser known
SHORT & DISTORT scheme.
PUMP & DUMP vs SHORT & DISTORT
Most traders have heard and read of the
Pump & Dump scheme. But very little has
been written about the other side of the
trade or its opposite, which is the Short &
Distort.
Now lets take the Short & Distort scheme
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 his agenda of stock
manipulation by controlling the market's
greed and fear.
STAGES FOR THE
DEADLY ART OF
STOCK
MANIPULATION
The Pump & Dump Scheme
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.
(Loading): In stage I of a Pump & Dump
scheme Manipulators after acquiring their
shares leak information and pump the
stock to get buyers silently. This leads to
front loading also.
Stage 2: The Promotional Campaign!
Note: this is designed to spread a
rumor/story and 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/Greed) Newsletter writers are
hired -- either secretly or not -- to
cheerlead 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.
Stage 3: The infamous DUMP!
(DUMP) The once low volume that caused
a bit of a spike suddenly changes to big
volume. The stock manipulators sell out
their positions into the new buying brought
on by the promotion campaign.
Stage 4: The Silence or News Vacuum!
(Silence) No more news or insider 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.
Stage 5: The Distortion!
(Gone/Waiting/Shorting):
Stage 6: The Accumulation!
(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 and slowly accumulating. As the
Shorters were shorting the first
manipulator was selling, so now 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.
STAGES FOR THE
DEADLY ART OF
STOCK
MANIPULATION
The Short & Distort Scheme
Stage I: Monitoring
In stage I of a Short & Distort scheme
Short groups Monitor spikes in volumes on
stocks with no rumors.
Stage 2: Flagging
Shorts Flag stocks that run up then sits
back and wait patiently for their time.
Stage 3: Preparation
The Shorters research the company and
develop their Distortion of the rumors to be
used later.
Stage 4: Actual Shorting
The shorts step in selling on every
possible up tick. This is the Reverse of
front loading. 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: Distortion Campaign
The shorts step in and 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
but now they need you to sell lower.
Stage 6: 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. 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 new news will be
hit it hard by shorters 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
Without warning the buying pressure is
too much and the short begins to cover.
Short covering combined with new
investors buying into the stock causes the
stock to go up. Often the whole thing
starts again. Just a vicious cycle
sometimes.
Note: Pump & Dump schemes I have
seen are investigated by the SEC most of
the time, however the Short & Distort
scheme is not apparently high on the
SEC's agenda. The shorts, 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.
Credit for post to Ga Bard |
