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  • How The Big Players Manipulate The Stock Market 69 comments
    Sep 3, 2012 7:12 PM | about stocks: HLF, NUS

    I have always wondered if the big stock traders were able to manipulate the stock market and how they did it. Now I am confident that I know the answer to both of these questions, and you will too, after you read this article, and view the information in the links provided. I describe and illustrate the process they use to manipulate stocks in easy to understand terms. First, so you don't think I am totally out of my mind making these allegations, here is a link for you to view a YouTube video of CNBC's Jim Cramer titled, "Market Manipulation is a fact" and a link to Jim Cramer's Wikepedia where you can find the following excerpt-

    "In March 2007, a December 2006 interview from TheStreet.com's "Wall Street Confidential" webcast stirred controversy after it appeared on YouTube.com. In the video, Cramer described activities used by hedge fund managers to manipulate stock prices - some of debatable legality and others illegal. He described how he could push stocks higher or lower with as little as $5 million in capital when he was running his hedge fund. Cramer said, "A lot of times when I was short at my hedge fund...When I was positioned short-meaning I needed it down-I would create a level of activity beforehand that could drive the futures." He also encouraged hedge funds to engage in this type of activity because it is "a very quick way to make money"."

    "Cramer stated that everything he did was legal, but that illegal activity is common in the hedge fund industry as well. He also stated that some hedge fund managers spread false rumors to drive a stock down: "What's important when you are in that hedge-fund mode is to not do anything remotely truthful because the truth is so against your view, that it's important to create a new truth, to develop a fiction." Cramer described a variety of tactics that hedge fund managers use to affect a stock's price. Cramer said that one strategy to keep a stock price down is to spread false rumors to reporters he described as "the Pisanis of the world". The comment was a reference to CNBC correspondent Bob Pisani, who reports from the trading floor of the New York Stock Exchange. "You have to use these guys," said Cramer. He also discussed giving information to "the bozo reporter from The Wall Street Journal" to get an article published. Cramer said this practice, although illegal, is easy to do "because the SEC doesn't understand it." During the interview Cramer referred to himself as a "banking class hero.""

    Even though I have traded in the stock market for many years, it wasn't until I recently starting trading stocks using TD Ameritrade's ThinkorSwim trading platform, where I can quickly analyze stock trading over various time periods (day(s), month(s), year(s)) as well as over short intervals (even as short as a minute), that I began to realize how shorts were manipulating the market. Since May 1st of this year when a short attack began against Herbalife (NYSE:HLF), I have been following all of the activity surrounding that company including all news stories as well as all daily trading activity.

    Before I began researching the information for this article, I began to see (HLF) trading activity that didn't make sense to me. In fact, it really didn't make sense that two companies under different ownership and management but mainly just sharing the commonality of being MLM's, Herbalife's and Nu Skin's (NYSE:NUS) shares were both attacked at the same time. Here is a link to both company's charts- HLF chart and NUS Chart , where you can see how their share price has traded over the last few months. (SUGGESTION: Use 6 month time period as well as candlestick format for the charts)

    Even though I believe there has been manipulation of Herbalife's (HLF) shares on a daily basis, I want to focus on the manipulation that occurred immediately after Herbalife reported Record 2nd Quarter 2012 which I discuss in greater detail in my article- "Herbalife Shorts Shorted More Shares To Stop Upward Share Price Momentum" In order to stop longs enthusiasm and the momentum created by a great 2nd quarter, shorts continued to added 585,409 shares of HLF shorted to their short positions over the period August 1, 2012 to August 15, 2012 to not only stop Herbalife's share price from rising but to also knock it back down by $1.85-

    Settlement DateShort InterestClosing Share price
    8/15/201213,007,577$53.05
    7/31/201212,422,168$54.89

    You might think an additional 585,409 shares shorted sounds like a small number of shares shorted since Herbalife has over 100 million shares outstanding. However, when you realize that there was only actually 11 trading days during that time period, and when you also understand that the shorts used computerized selling and buying of shares at opportune times to manipulate the share price, you should understand why they were able to control Herbalife's share price during that time period, to stop the upward share price momentum, and then to drive the share price slightly down.

    How it works

    This process can be used by hedge funds to either pump up a stock or to trash a stock but since I am using Herbalife as an example, we will discuss that situation. First information is widely distributed to make investors wonder about the company and to put fear into those longs that hold the stock. Next, high volume shorting takes place to drive the company's share price down.

    As the short attack continues, more people parade out news to continue to put questions in the back of investors' minds. On a daily basis, shorts use computerized trading to control the direction of the share price. At opportune times, the shorts overwhelm the buyers (bid price) of the stock by selling short large number of shares to drive the share price down and to eliminate the buyers for the stock at that given time. For people who are not familiar with the bid/ask process of trading stocks, here is a link to explain that process.

    Shorts need to control the stock's share price over a long time (often several months to well over a year), and can't afford to just accumulate an unlimited number of short positions in the stock, so they have to be buying shares at the same time they are selling shares too. When the shorts drive the share price down, eliminating buyers as discussed above, some of those investors trying to sell their shares at that same time will follow the share price activity downward lowering their ask price.

    Now the shorts can buy back some of the shares they have shorted at lower prices including some shares where longs have put stop-loss sale orders to protect against downside losses. The shorts will only buy shares part of the way back up as the share price rises, and then wait to see if new buyers come into the market. If the share price continues to rise up to much again during the day, the shorts will repeat the same selling and buying process to control the share price.

    As mentioned above, the shorts need to control the share price over an extended period of time. They need to wear down the longs with rumor mongering as well as by creating fear as the longs continue to see the share price go down from the computerized trading. They hope the longs will give up and sell their shares at the lowest possible share price.

    Another observation, shorts try to wear down the longs by making sure that the share price closes down as many days in a row as they can put together. At the close of each day, I witnessed volume dramatically increasing as the shorts tried to insure Herbalife's share price closed down. Shorts are hoping the longs frustration with the share price continuing downward will end up in capitulation where as many longs as possible just give up and sell their shares.

    I don't know how low the shorts will drive the share price of Herbalife during this current short attack, but I do believe Herbalife is a strong good growing company. As with all false short attacks, the share price will bounce back. After the share price bottom is reached, I expect the shorts to continue their rumor mongering so they can continue buying to cover their shorts as the share price rises back up.

    Since Herbalife is already in its 5th month of being attacked by shorts, and if history repeats itself, anyone buying shares of Herbalife (HLF) at this time should be in for some nice gains over the next 6 to 12 months as Herbalife's share price rises back to and above where it was when this short attack began. The shorts greatest fear is that people will figure out their lies to soon, and the share price will rise up to quickly. I think there is a good chance for that to happen as a lot of people will be learning more about this scheme.

    Also I have to believe this manipulation has to involve collusion between all the major players in the Herbalife short attack since it wouldn't work like it has if they didn't work together. If one or more of the major short players decided they didn't want to participate further in driving the share price down, and decided to buy to cover, this would create a major problem for those other major short players. The remaining major short players would not only have to drive the price down based on selling shares to new longs but would also have to sell shares to those other major short players buying to cover their shorts. The remaining short players would not be able to manipulate the stock share price as easy as they did working together.

    If you are wondering why would they short more shares even when a company like Herbalife is obviously a healthy growing company. Here is the reason. Since the shorts already have the investment community wondering about problems, introduced by the shorts themselves, concerning the company; since shorts have already shorted $745 Million+ (12,422,168 X $60 per share (my guess at average share price shorts sold their shares at)) shares of Herbalife; and by just adding almost $32 Million (585,409 X $54 average-?) more shares shorted, the shorts were able to take the steam out of a lot of the longs' enthusiasm over the 2nd quarter financial news, and now the shorts believe they will have a better opportunity to buy to cover their shorts at a lower price as well as they will have more time to do so. At least that's what the shorts hope for.

    Also from the shorts view, they have offset that additional $32 Million of shorting by reducing the basis of the 12,422,168 shares they already had on their books by an almost $23 Million (12,422,168 X $1.84 share reduction) of increased unrealized gain. On top of trying to obtain direct profits from controlling the share price, and since shorts know more about the direction of the share price, shorts are able to make more profits from selling and buying options. I would have to believe these option profits could run into the millions of dollars too.

    As you can see from the large dollar amounts involved in Herbalife's short attack, these must be big players and they must have a lot of influence over the marketplace which brings me to my next subject.

    I am really concerned about the investment reporting we are getting from the media especially from CNBC's reporters Jim Cramer and Herb Greenberg. Jim Cramer, who apparently couldn't recommend Herbalife's stock during the last short attack in 2008-2009 which included the same short arguments currently being used, "Herbalife Short Attack: History Repeats Itself."; changed to repeatedly recommending to buy the stock as the stock climbed up to the $70+ range, and then abandoned longs once again by changing to not recommending Herbalife's stock as he tells everyone per this 8/8/12 video "Lightning Round" (see video at 2:50).

    It appears Cramer just abandoned those Herbalife longs again including those that purchased their shares based on his recommendation to join his hedge fund buddies that are short Herbalife. Cramer claimed that he couldn't recommend Herbalife based upon a decision made over 4 years ago by Herbalife to not fight a legal battle with Barry Minkow, a convicted felon which his fellow CNBC reporter Greenberg brought to his attention and discusses in his article, "Why Did Herbalife Pay Felon Barry Minkow $300,000?: Greenberg". I have fully explained, in the following linked article, why Herbalife made the decisions they made surrounding this issue and have emailed this information to both Cramer and Greenberg with no change or response by either of them- ""Response To Greenberg: Reasons Why Herbalife Paid Felon Barry Minkow $300,000"

    As far as to Greenberg's reporting, I don't know what his connections are to the big hedge funds shorting Herbalife, but I think he seems desperate to come up with "what if this happens" issues to the point that even Per this CNBC 7/31/12 interview of Michael Johnson, Herbalife CEO by Cramer and Greenberg (at 10:18 of video), Johnson seemed puzzled when Greenberg frantically blurted out his last question as if he was trying to search for one last dagger to put in Michael Johnson's back-

    Greenberg's question: "You are very big in Mexico- Wal-Mart had problems in Mexico- How do we know you are not paying bribes in Mexico?"
    Johnson's response to Greenberg: <laughing> "You are coming from a very interesting place. We got to get you wired for positive."
    Other CNBC commentators: <laughing in background> "How was that a follow up for the Avon question?"

    How to tell a correctly shorted stock versus a short attack bluff

    Since David Einhorn's innocuous questions on Herbalife's conference call seems to be the event that started the short attack on Herbalife, and since Einhorn loves poker, I will use poker terms to explain how you can determine whether a stock is shorted for good reasons or just a bluff.

    If you believe you have a winning hand in poker, you want everyone else to put in as much cash as they possible can. You don't want to tip them off in any fashion that you have the winning hand. You want the pot to as big as possible when you show your hand. If you don't have a good hand and are bluffing, you need to be sneaky putting in bets when you really know you don't have a good hand hoping that the other players fold their winning hands. You don't even want others to put more cash in the pot since you want them to drop out of the game.

    First you need to understand that the object for shorts is selling as high as they can and then buying as low as they can if they have to cover their short position. For those of you who are not familiar with selling stock short, here is a link to explain short selling. Also when longs are selling their positions, they will always try to sell their shares at the highest price they can get.

    If you knew a company's share price was really overpriced for any reason, you would not do anything to tip anyone else off until you had shorted all the shares you could. Then, given the right opportunity to show your hand, you would explain your position as to why the shares were over priced in a logical fashion. Yes, there would be other shorts jump in to help drive the share price down but it wouldn't necessarily be about driving the share price down based mainly upon high volume trading. You would be ok with longs coming into the market to drive the share price up (more cash in the pot) since it would give you more of an opportunity to short at a higher price before your real prediction came true.

    If you were a short bluffing (basically manipulating a shares' price) about a company's overvalued share price, you might not want to draw attention to yourself since you could get accused of stock manipulation so you would hope (or plan for) others to get involved and to present seemingly good reasons to short the stock. You would want to put as much fear into longs as possible and would use high volume short trading as well as buying to drive the share price down as low as you can and as long as you can. You really want the longs to fold and to get out of the game. If you are consistently seeing sellers overwhelming buyers driving a share price down as a stock seems to be going up, I can assure you it's probably shorts selling since longs are totally motivated to sell their shares at the highest possible selling price.

    Here is what one stock investment reporter from one of America's premier financial magazines, who had wrote some articles about Herbalife's situation which I disagreed with, emailed me (I will not give his name out as I don't want to cause him problems.)-

    "I'm no lawyer but doesn't it reek of stock manipulation? I would think so. A lot of hedge-fund types I come across are skittish about appearing in the media whatsoever, much less being portrayed (correctly) as tanking a stock.

    It could be as simple as a (well-advised) desire to not invite more regulatory scrutiny."

    I believe that stock market manipulation by big players is a major problem. I know this article focuses on one stock, but just like cockroaches, if you can find one, I am sure there are a lot more out there. The only way we are going to make changes in this society is to make as many people, especially our elected officials, aware of this problem as we can. I am sure this problem steals money from the vast majority of our investments and retirement programs. If you agree with me, and you want to help me try to do something about this problem, by getting the word out, please email this article, post to facebook, twitter, LinkedIn, etc. links to this article, of my blog, to as many people as you can.

    As for me, I am long HLF shares and I still believe that Herbalife shares are a great buy as per my article, "Herbalife Shorts' Problems Could Be Great Buying Opportunity For Longs".

    Disclosure: I am long HLF.

    Stocks: HLF, NUS
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Comments (69)
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  • janiecrew
    , contributor
    Comments (2) | Send Message
     
    look at qcor, bear raid and shorts. shame that they do this to good companies.
    1 Oct 2012, 01:26 AM Reply Like
  • fanofgoodstocks
    , contributor
    Comments (26) | Send Message
     
    Good article.
    How about a follow up article?
    Choose a high profile company other than Herbalife for your analysis?
    30 Dec 2012, 12:20 AM Reply Like
  • cfezziwig
    , contributor
    Comments (436) | Send Message
     
    Try BBRY, 30% shorted and absurd media coverage
    6 Mar 2013, 03:40 PM Reply Like
  • fanofgoodstocks
    , contributor
    Comments (26) | Send Message
     
    Perhaps it is time you do a follow up.
    I believe that these tactics are everywhere in the Hedge Fund Industry.
    The temptation is so strong. Government agencies don't understand the schemes and are ill equipped to act quickly.

     

    Take for example what happened to Rim's stock the day after it had its conference calls. On the 21st of December over 146 million shares traded.
    Institutional ownership stands at 56.9% 298,228,759 shares
    Retail ownership stands around 220 million.

     

    The total number of shares traded on the 21 of December represents more than half of all retail shareholders' holdings combined.

     

    I submit to you that the unusual volume was mostly due to trades made by Fund Managers and Hedge Funds to push the price of RIMM shares down in wake of call options that were just a day from expiring. Call options expired literally worthless making the call writers of those options richer literally overnight. The same day PUT contracts sold and call contracts could have been purchased at a discount because of the huge bloodbath of the stock.

     

    A couple of days later, sure enough the stock regains some of its losses and, I am assuming that the same Hedge Funds that bought call options at a discount, are now able to flip those contracts at a profit of at least 100 dollars per contract if not more.

     

    Quick money made on the options that expired, plus options purchased at fire-sale prices _plus the same options resold at a huge profit literally overnight + the money made on the shares that were dumped by unsuspecting retailers because of stop loss orders...basically one group of people feeding many times on the same money in a very short time.

     

    It's ok for big players to leveredge themselves with call and put options and deal making over lunch. It's quite another thing for a small group of Hedge Funds to collude and use funds and influence to create a false impression of a company and then co-ordinate a selling frenzy with their computerized systems that knock down the sp ..
    30 Dec 2012, 12:51 AM Reply Like
  • ralphrides
    , contributor
    Comments (100) | Send Message
     
    I understand how shorts and I assume buying lots of puts can decrease or hold down a stock, but how can this be done with covered calls? If one sells lots of calls at a price just above the average stock price, that seller has a lot of profit at stake if the stock never gets to that strike price. So how can the stock be held below that price by buying shares at a discount? Or is it just volume buying and selling like day trading to hold the stock low? Take AAPL for example, it makes no sense that the stock has not recovered yet. Any idea how this stock is being held below $550 for so long?
    11 Jan 2013, 12:08 PM Reply Like
  • Micro Magic
    , contributor
    Comments (61) | Send Message
     
    This article seems to be the strongest on stock manipulation I can find on SA. I think if you did the research on AAPL happening right now, it would get published and be highly appreciated.
    27 Jan 2013, 12:33 PM Reply Like
  • ps72
    , contributor
    Comments (18) | Send Message
     
    I think Facebook is a prime example. Look at the q4 earnings report that came out for Facebook. I wonder if someone sold some put and call options barely out of the money before the earnings report? I think the manipulation happens both ways in that sometimes I think instead of buying the calls and put options, they sell them instead. I think you have better odds of pinning a tail on a donkey blind folded from over a mile away, than you can have over 189 million shares traded (3x normal volume) and the stock price literally barely moves 1% for the day. Facebook stock $31) traded down $3.5 dollars in like literally seconds of the earnings release in after hours trading the day before and then recovered just as fast. I just don't think it adds up without market manipulation.
    31 Jan 2013, 04:07 PM Reply Like
  • BuyBack King
    , contributor
    Comments (71) | Send Message
     
    The Icahn/Ackman might be a staged fight. The purpose is to get the FTC involved to shut HLF down. That is the only chance the shorts have.
    5 Feb 2013, 01:27 PM Reply Like
  • ajk829
    , contributor
    Comments (13) | Send Message
     
    Bbry aka rimm has been the most manipulated stock ever over the past 2 years. All the bs lies and fud spread about them. Now they have the best phone on the market and shorts take it down with some idiotic home depot news. When you look at tech stock valuations and where bbry is going with sales and profits, and how analysts low ball to get a big beat and vice versa when they want to drive it lower, it;s so obvious bbry should be a $50 stock today. And it will in a few months.
    13 Feb 2013, 08:43 AM Reply Like
  • spike1
    , contributor
    Comments (53) | Send Message
     
    ALL short sellers should be beaten. Harshly.
    18 Feb 2013, 10:27 PM Reply Like
  • ozarkrunner
    , contributor
    Comments (4) | Send Message
     
    If you want to see how a bear raid is both promoted and carried out check out Navidea Biopharmaceuticals (NAVB). The manipulators love to attack small Biotech. stocks with new drugs in trial. It has been educational to watch the short crowd spread half truths and doubts then hit the price with HFT programs. This process has been going on for over a year with the manipulators approaching an 18% of float short interest. By April 30th we will know if the FDA approves our drug. I really think Shorty believes that he can win this game. However, there is nothing like watching the revenues increase radically over the next two to three quarters of sales. This slimy crew can lie and cheat for only as long as there are no or low sales. Then the P/E ratio becomes pressurized and it is our turn to apply the squeeze on them. They will deserve exactly what they get.
    18 Feb 2013, 11:35 PM Reply Like
  • eldon wilk
    , contributor
    Comments (95) | Send Message
     
    I think, if I'm reading this article correctly. After a sustained attack and they've been profiting on the games played during the attack. They just need to hold their shares at the correct time and would profit on any share advanced when they relinquish control.
    6 Mar 2013, 05:15 AM Reply Like
  • alambrose
    , contributor
    Comments (11) | Send Message
     
    I would echo the comments by ozarkrunner in the previous post; upstart biotechs are indeed the favored playground of racketeering short sellers. Go to websites like freelancer.com and you can search on company names and find open advertisements for stock message board posters. These "jobs" will spell out the requirements of how many posts required daily, pay per post, and so forth. Basically, a confirmation of the paid pumping/bashing that everyone already suspects (buy are not totally sure) to be true.
    23 Feb 2013, 08:30 AM Reply Like
  • naharon02
    , contributor
    Comments (5) | Send Message
     
    Great Article, it is exactly what is going on in the past week with AMRN. i am trying to get some of the news networks to take interest and air this issue in one of their investigative shows..
    26 Apr 2013, 07:44 AM Reply Like
  • ulieq
    , contributor
    Comments (13) | Send Message
     
    One solution is to outlaw shorting of stocks one does not physically own.

     

    Let's say you own a house and want to sell it. While you are trying to find buyers, a bank pays you 20% interest yearly (horrible interest on a daily scale). That bank then does the same to 100 other owners, then they sell all those houses (that they do not own) at below true market price in a short period. The market then begins to believe the lower price resulting in these false sales is the true price, and that permanently lowers asset price. The interest paid to barrow someones asset does not offset the permanent damage done to the asset value.
    30 Sep 2013, 12:52 PM Reply Like
  • spike1
    , contributor
    Comments (53) | Send Message
     
    I agree completely. If you think a company is not worth what the stock is selling for, then buy put options.
    I'm all for having a few big short sellers beaten up a little bit on the streets of NYC. Then they might start looking over their shoulders and stop the manipulation.
    5 Nov 2013, 03:14 PM Reply Like
  • KarlShen
    , contributor
    Comments (135) | Send Message
     
    Hi, thank you for the wonderful read. Sometimes I look at the charts and think I'm being paranoid or crazy. Glad to get verification that there is a chance I might not be insane
    4 Nov 2013, 10:17 PM Reply Like
  • Bigdaddio45
    , contributor
    Comments (29) | Send Message
     
    This still happens every day and in almost every stock. You'll see 100k shares being bought and the stock only goes up a few pennies and then 10min later, 1500 shares being sold drives the stock down $0.15. Also watch for large trades down and then almost immediately back up for signs of this behavior.
    5 Nov 2013, 07:39 AM Reply Like
  • vietnguyen9
    , contributor
    Comments (2) | Send Message
     
    Look at WPCS , it has only 1.56 M outstanding shares and trading volume at Dec 27, 2013 is 33M (according finance.yahoo.com).
    or ARIA trading volume for couple days ago. Where is the virtual shares come from ??? If SEC and FBI do not intervene those trading, so I think we are deserved to get an another financial crisis like 2008 soon :)
    28 Dec 2013, 11:34 PM Reply Like
  • Thomas Almond
    , contributor
    Comments (363) | Send Message
     
    I was a bit late finding and reading you're article, but I just had to tell you that I thought it was great. I shared it today with my friends in the TWTR StockTwit's stream.
    9 Jan 2014, 09:32 PM Reply Like
  • G. Hudson
    , contributor
    Comments (317) | Send Message
     
    Author’s reply » Thomas,

     

    Thanks for the comment. I actually wrote this article before I found out that it was mainly Ackman shorting this stock. It even made more sense to me as I thought it would be very difficult for a group of short sellers to make Herbalife's share price behave the way it was.

     

    I am disappointed with Seeking Alpha's editors in turning down some of my articles which I then posted to this blog. I even accurately predicted the whale would be breaking bad news the week before I found out that it was Ackman behind the shorting of Herbalife. Also another great read is my blog post on "History Repeating Itself" which talks about the 2009 short attack on Herbalife and how the stock had acted and basically predicted the share price recovery that Herbalife has had since that time.
    10 Jan 2014, 01:41 PM Reply Like
  • Thomas Almond
    , contributor
    Comments (363) | Send Message
     
    @ G. Hudson

     

    What I think is so great about you're article has nothing to do with Herbalife. I have never traded it. I am familiar with the Ackerman background and did follow the stock for a time.

     

    My compliment has to do with the valuable underlying lessons you're article imparts. The insight you offered readers is an imperative lesson for anyone who trades.

     

    There is no doubt that TWTR has been and is being subjected to the manipulations by Fund managers today. Momentum Fund managers were behind TWTR's run up to $74 then down to $59 and then back up to $70. I got word from a Hedge Fund person that on Monday 1/6/2014 they moved on to LNKD and YELP and now TWTR is down to $57. Add in all the Punditry and Analyst upgrades and down grades with CNBC and Cramer all over TWTR and the truth of you're article smacks you in the face with a hard dose of reality.

     

    I got out green shorting it when it got down to $55.95 yesterday. I am staying out thanks to you're article even though I think TWTR will tank to $30, or less by June.
    10 Jan 2014, 02:14 PM Reply Like
  • Daniel Hudson
    , contributor
    Comments (36) | Send Message
     
    Good article and good to see you were vindicated by your investment in hlf. I'm hearing more and more complaints about seeking alphas journalistic influence too. Unfortunately.
    12 Jan 2014, 11:59 PM Reply Like
  • drdon
    , contributor
    Comments (205) | Send Message
     
    I was just pointed to this article. It's a classic and should be read by all who invest in stocks. I am a stockholder in Questcor and the short manipulation of this stock is following in the exact same path that you have so brilliantly described. Thanks for your expertise.
    12 Jan 2014, 12:02 PM Reply Like
  • nyjohngrey
    , contributor
    Comments (12) | Send Message
     
    BTW.

     

    Everyone posting about TWTR - reliable stock pickers put it's real value iat 38, 39, so this makes the stock's overinflated price make it cake to manipulate. Even the 50s are hugely overpriced.
    12 Jan 2014, 11:28 PM Reply Like
  • nyjohngrey
    , contributor
    Comments (12) | Send Message
     
    You have described what is happening in QCOR from 2012 into early 2014 perfectly. I love the poker analogy - it fits perfectly, and can be seen time and time again with QCOR. You have strengthened my resolution to stay the course - although PPS has more than doubled in a year, we are 40% off our high in October, and I have witnessed the shorts take the stock down 10% 3x is once September, essentially shorting fast and furious until the uptick rule was invoked. The shorting was so blatant and so fast the 10% price reduction has occurred in 45 minutes from opening.
    12 Jan 2014, 11:29 PM Reply Like
  • jamiejaytrader
    , contributor
    Comments (36) | Send Message
     
    great article Hudson!

     

    QCOR is a stock thats been heavily manipulated by shorts and it has been going on for years! Really crazy! but they can't stop a strong growing company forever ;-)

     

    Have a nice day!
    12 Jan 2014, 11:30 PM Reply Like
  • robauk
    , contributor
    Comments (3) | Send Message
     
    wow i responded to this yesterday, and got an email saying it was deleted for some weird reason, anyway what you describe in your article is exactly what is going on with aria ( ariad pharma), it is i would say even worse, they have held this stock down so much it is bad! 12/20/13 fda re approves iclusig after 2 moths off market and the stock actually freezes! going up, from that day until now hundreds of millions of shares have been sold, bought, imaginary share sold, bought. where is the SEC, this stock should be 10-11 at least right now, but big money controls the market and it in my opinion is illegal
    12 Jan 2014, 11:59 PM Reply Like
  • tgrimley
    , contributor
    Comment (1) | Send Message
     
    Need to figure out how to do this in reverse. Instead of short attacks, turn the table and have long attacks.
    13 Jan 2014, 12:05 AM Reply Like
  • Thomas Almond
    , contributor
    Comments (363) | Send Message
     
    Momentum Fund Managers do Long attacks all the time. That is why stocks will go way up in a crazed mania and then all of a sudden go dead and fall. That is what was done with TWTR recently.
    14 Jan 2014, 10:57 AM Reply Like
  • Thomas Almond
    , contributor
    Comments (363) | Send Message
     
    You can add JC Penny to the list of short targets.
    13 Jan 2014, 07:37 PM Reply Like
  • shortsqueezer
    , contributor
    Comments (668) | Send Message
     
    Thomas you beat me to it!! I was watching the afterhours on JCP and somebody sold over 500,000 shares at a lower price than the last 20 transactions.

     

    because Ullman did not give out SSS #'s it was the perfect excuse. They burnt me before when the stock dropped to 6.42 a month or so ago. I thought I was paranoid when I kept loading up and it kept falling. Then as soon as I sold (it was quite a large position...enough to be noticed, or stand out), it jumped up within the hour. Maybe that was just bad timing on my part...but DEFINITELY MANIPUKATION here. JCP SAID ALL IS GOOD!!!! Buy JCP now before the cover...and do not sell.
    14 Jan 2014, 01:12 AM Reply Like
  • shortsqueezer
    , contributor
    Comments (668) | Send Message
     
    Mr. Hudson...THANK YIU SO VERY MUCH!!! please message me I would love to help in any way I can
    14 Jan 2014, 01:15 AM Reply Like
  • robauk
    , contributor
    Comments (3) | Send Message
     
    thomas almond, i think you are wrong, twitter was short attacked not long attacked, think about it ( long means long term), i am sure they had many many days to cover so the price went up every day, but it was still a short attack not a long attack give me a break that makes no sense. key factor was the days to cover they had a long time before they covered so they made a short attack and a bunch of money
    18 Jan 2014, 09:21 AM Reply Like
  • Thomas Almond
    , contributor
    Comments (363) | Send Message
     
    @ robauk ...The Momentum Fund Managers were doing both, but without them the PPS would have never climbed as high as it did. They make profit both ways. Bottom line is they were manipulating it.
    18 Jan 2014, 01:34 PM Reply Like
  • Engineer Guy
    , contributor
    Comments (64) | Send Message
     
    best way to deal with this problem. 1. play along with the manipulation. buy when the prices are artificially lowered, sell if they are artificially high. You need to know the real value of the stock. If you can't do that, then you are just gambling. Best of luck to you all.
    8 Feb 2014, 06:13 PM Reply Like
  • Toubz
    , contributor
    Comments (5) | Send Message
     
    Ditto Mr.Hudson.I see this with 3 D systems.They've done it to Tesla.It's a shame.The big hedge funds are winning and the SEC can't do anything.All illegal.
    9 Mar 2014, 03:58 AM Reply Like
  • febeedog1
    , contributor
    Comments (3) | Send Message
     
    Vringo (VRNG) prime example! OMG we are victims of circumstance. Thanks for your article.
    9 Mar 2014, 04:30 AM Reply Like
  • gldooley
    , contributor
    Comment (1) | Send Message
     
    VRNG. The ultimate manipulated stock. Drops on good news time after time to keep it undervalued
    9 Mar 2014, 02:42 PM Reply Like
  • Graham11
    , contributor
    Comments (7) | Send Message
     
    thank You for the article ....I have riposted the link on several stock blog's where appropriate and to several friends ...again that you for the insight ......... best to you
    10 Mar 2014, 09:28 AM Reply Like
  • Graham11
    , contributor
    Comments (7) | Send Message
     
    you want a good current example over the last 6 months ......inst ownership went from 30% to 74% ....the company is CYTK
    10 Mar 2014, 09:28 AM Reply Like
  • IamHopeful2
    , contributor
    Comments (158) | Send Message
     
    Great article...you know which stocks this happens to a lot..Chinese names..I see the exact things written here in the stock sina...it's like I could have replaced where you put hlf in your article with sina...I think the Chinese names are easy targets because who's going to defend a Chinese company from a short and distort manipulation campaign? The SEC? Ya right...if the SEC does nothing about algo/hft manipulation to stocks in general, they're going to do even less for a Chinese company...it's ridiculous how inept the SEC and FTC are, or should I say how much on the take they are...
    14 Mar 2014, 05:03 PM Reply Like
  • RichPat
    , contributor
    Comments (8) | Send Message
     
    With all the derivatives and options markets, high speed trading and super computers, the stock market has presented great opportunities for those with the large resources and no ethics to take advantage of traditional and consistent stock traders buy/sell tendencies. Individual traders must do as mentioned in a previous comment. Recognize those opportunities where the price is being manipulated and jump on board.
    15 Apr 2014, 02:20 PM Reply Like
  • myrestofthestory
    , contributor
    Comments (15) | Send Message
     
    Great article... The Cramer video has be viro for years. Another stock that is manipulated is KNDI and another stock HYGS that is in an unrelated industry have basically the same pattern in their charts. Not that any of us that have been following KNDI did not know the stock was being manipulated by the short traders.

     

    Would like to see a follow-up on this story as it appears other reputable publishers / business news organizations have not demonstrated the leadership to call this out.
    15 Apr 2014, 11:29 PM Reply Like
  • Mosbear64
    , contributor
    Comments (197) | Send Message
     
    I definitely agree that KNDI has got to be the most manipulated stock in the universe right now... mostly by shorts... hit piece articles, trashing on message boards, fictitious press releases that get published on Yahoo Finance and recycled 3-4 times... share sleuth bringing up accusations from years ago that never have been proven (or have been proven baseless).. you are right on that the mindless media has no leadership skills to call this illegal practice out!
    6 Jun 2014, 08:52 PM Reply Like
  • pjg69ny
    , contributor
    Comments (236) | Send Message
     
    Look at NAVB another example of a manipulated stock
    2 May 2014, 10:58 AM Reply Like
  • TigerMom
    , contributor
    Comment (1) | Send Message
     
    Thank you for your insight article..

     

    I knew there were some manipulation on the stocks that I invested but couldn't figure out as clearly as you laid it out..

     

    Here is my question:

     

    Is there a profit to manipulate a. 003 stock ($GNBT)? With the Upstick Rule, the margin is too low to profit?

     

    Thanks and God Bless!
    8 Jun 2014, 03:44 AM Reply Like
  • Lyon8
    , contributor
    Comments (4) | Send Message
     
    Even thought the article was written in 2012, it is great to read it in 2014 as I have experienced several similar situations. I lost small amount of money, which I treated as tuition free for learning "what's going on for the stock price".
    2 Jul 2014, 05:15 PM Reply Like
  • gsm283
    , contributor
    Comments (13) | Send Message
     
    There is a high correlation with the period just before earnings are released. You can see this in the charts if you're looking for it. Most people aren't though, and that's how the manipulators make their money.
    2 Aug 2014, 06:14 AM Reply Like
  • z2blackdogs
    , contributor
    Comments (7) | Send Message
     
    NEON and HERO are recent examples.
    19 Aug 2014, 12:52 AM Reply Like
  • Rospim
    , contributor
    Comments (13) | Send Message
     
    Great article.Now is NWBO the target.Hopefully SEC investigate Adam feurstein,to find out who's interest He is working for.He is bashing NWBO for personal gain
    21 Aug 2014, 02:57 PM Reply Like
  • Mr N
    , contributor
    Comments (2) | Send Message
     
    Thank you for the great article. I am relative newbie, and I didn't quite believe people complaining of this on message boards - there is so much blather and whining. Disheartening. On a more abstract level, doesn't this shoot the "efficient market" theories full of holes?
    20 Sep 2014, 01:56 AM Reply Like
  • Mr N
    , contributor
    Comments (2) | Send Message
     
    Thank you so much for this great article. I'm relatively new to all this and didn't really believe what people were saying about manipulation on message boards. Disheartening. Doesn't this seem to shoot the "efficient market" type theories full of holes?
    20 Sep 2014, 01:57 AM Reply Like
  • hsn2012
    , contributor
    Comments (3) | Send Message
     
    (First of all this website's registration process sucks).

     

    Well... with relatively fast computers having super fast network connectivity (network latency plays an extremely important role here) sitting pretty close to the stock exchange, you can achieve this with just a few stocks ( I dare to say just a 1000 shares). All you have to do is place your bid at a slightly lower (or higher) price than the preceding successful trade and do it in such an interval that the second system will buy that from the first system before anybody else gets a chance (so that you don't loose the ownership), and now do the same thing again and again until the price has reached the level you want to really buy or sell.
    25 Sep 2014, 01:04 PM Reply Like
  • hsn2012
    , contributor
    Comments (3) | Send Message
     
    Well... with relatively fast computers having super fast network connectivity (network latency plays an extremely important role here) sitting pretty close to the stock exchange, you can achieve this with just a few stocks ( I dare to say just a 1000 shares). All you have to do is place your bid at a slightly lower (or higher) price than the preceding successful trade and do it in such an interval that the second system will buy that from the first system before anybody else gets a chance (so that you don't loose the ownership), and now do the same thing again and again until the price has reached the level you want to really buy or sell.
    25 Sep 2014, 01:04 PM Reply Like
  • ignas1
    , contributor
    Comments (12) | Send Message
     
    Manipulating healthy company stock down in a very strong market just doesn't make much sense. For some reason I feel someone is butt hurt after losses and try to rationalize his bad trading with old as market conspiracy theory how shorting is bad... Some manipulation could go on rarely but in general most good traders only short companies that they see some fundamental flaws in. It just not worth the effort and risk to short strong company "just because I can". Of course now we might hear one more time how it is good to limit freedom to short and we need "to do something about it" because some losers lost money. When in reality markets provides liquidity and price discovery and forbidding short selling would hurt its main purposes. And not to mention that in times of panic smart short sellers provides some support for markets by taking their profits. But of course someone else and not myself getting rich is very bad and morally wrong :)
    29 Sep 2014, 07:00 AM Reply Like
  • IamHopeful2
    , contributor
    Comments (158) | Send Message
     
    ignas...what world are you living in? Google stock manipulation and dozen of stories come up about it happening everyday...Goldman Sachs reported that it has sat aside over $3,000,000,000 because of the current SEC investigation of the company for stock manipulation??? Of course there's always going to be some "sour grapes" in the bunch, but stock manipulation is not some conspiracy theory, it is PROVEN fact...
    29 Sep 2014, 08:03 AM Reply Like
  • ignas1
    , contributor
    Comments (12) | Send Message
     
    When you buy/sell stock you are already manipulating it. All our manipulations results in what we call a market. I'm not saying there are no manipulation at all - it's obvious that bigger players have more leverage and generally more information about markets. Hoverer this article implies that "evil" speculators takes on perfectly fine companies and drives stock price down "just because" which is pure bullshit. It makes no sense to pee against the wind and I'm pretty sure that kind of manipulations are rare enough to not give a sh.. about it. And now I'm reading cries how short selling should be banned because "we must do something". This fear mongering with following herd stupidity is what I don't like. Had he talked about some more real pump and dump scheme and warn investors how to recognize and protect themselves that would be fine, but this crying and blame game just tells me that the author is simply some loser whose opinion should be taken with grain of salt.
    29 Sep 2014, 10:06 AM Reply Like
  • hsn2012
    , contributor
    Comments (3) | Send Message
     
    http://usat.ly/11xND3a

     

    "Using a trading algorithm dubbed "Gravy," Athena carried out the manipulation by placing high volumes of rapid trades during the final two seconds of nearly every trading day during a six-month period in 2009"... They will still laugh their way to the bank as the penalty is only one million dollars.
    16 Oct 2014, 07:36 PM Reply Like
  • HAEMAN
    , contributor
    Comments (273) | Send Message
     
    Very nice Article, If not already on here you can add MNKD to the list 30% short. 41 Million Naked Shorts, "Failure to Deliver". Where there is money to be made and lost, evil will dictate.
    18 Oct 2014, 09:04 PM Reply Like
  • sugarsail1
    , contributor
    Comments (113) | Send Message
     
    You didn't even mention how they use options in tandem with shorting the shares. Before they short they sell call options on their stock position, then short rendering those calls naked temporarily, but they don't have to worry since they short until stock price is below the strike at expiration and the calls expire worthless. You can see evidence of this when expiration day comes and the share price is held within a penny or two under the strike price. See: CLF this Friday.
    7 Dec 2014, 07:28 PM Reply Like
  • sukitfup
    , contributor
    Comment (1) | Send Message
     
    The author did mention options. I feel this happened to CYRN today. 100 shares lowballed every 5 seconds for the last hour of trading.
    22 Dec 2014, 08:20 PM Reply Like
  • soay
    , contributor
    Comments (17) | Send Message
     
    Look at $gern 30 million shorts
    17 Feb, 03:25 AM Reply Like
  • nsite4mom
    , contributor
    Comments (16) | Send Message
     
    Forcing short squeezes is another game the hedgies play.By going long 15 million shares, a heavily shorted stock soars higher by tripping stop losses. After buying the 15million shares, the hedge fund's 13-F is advertised on CNBC. New analysts jump in with BUY ratings and the old analysts who barely liked the company, change to a Buy....why? Because the hedge fund is driving the trading up. If insiders collude by announcing buybacks and then re-issue old PR as New developments, you can watch a company soar to new highs with no change in fundamentals. Of course, when the hedge fund's next 13-F reported buying Put options against the company, CNBC didn't mention it!The small investors lose their shirt, the hedge fund & insiders make a bundle----& the SEC? They chase algorithmic traders for spoofing the market! What do you call it when hedge funds join forces and raid a stock with buy orders so it flies for no reason? As for media...they usually red-flag insider selling...no notice on this one! Insiders dumped 400,000 shares at the high & borrowed cheap low-interest money to announce a buyback of the stock at the high! Cramer pulled the same move you described. Rated it a "hold" at best with too much debt until his hedge fund buddies jumped in...suddenly...rates it a "Buy" stating the pros out weigh the cons....I think the pros are cons! Name of the company withheld for now...want to watch what additional games the hedgies have in store! I'd whistle blow to the SEC but this stuff is done all day and every day. If the stock market actually reflected the true valuation of the companies it represents, this market will fall like a cinder block!
    3 Mar, 01:53 PM Reply Like
  • G. Hudson
    , contributor
    Comments (317) | Send Message
     
    Author’s reply » Good post. The stock market has little to do with the actual valuation of a stock- the value of a stock is run up beyond its true worth when the major players get behind it and down below its true worth when they need to drive it the other way.

     

    I wonder how much of the Lumber Liquidators was about driving the stock down as a result of the people behind the story versus the real truth. I can't say myself but it wouldn't surprise me if the shorts made it up using their version of the story which used some borderline research to support their lie.
    4 Mar, 09:38 AM Reply Like
  • winchair
    , contributor
    Comment (1) | Send Message
     
    Gevo is another fine example...
    28 Mar, 11:40 PM Reply Like
  • jerryjamal
    , contributor
    Comments (18) | Send Message
     
    Seeking Alpha's VERY OWN -MATT FINSTON DOES THIS TOO ...JFYI
    22 Apr, 08:58 AM Reply Like
  • Lee F
    , contributor
    Comment (1) | Send Message
     
    182696 shorted on May 5th, 2015, 226844 shorted on May 6, 100279 shorted on May 7. while HLF stock price increased close to 20%, is ICAHN running out of control of this stock ? Thanks.
    9 May, 06:07 PM Reply Like
  • Equityresearchlab
    , contributor
    Comment (1) | Send Message
     
    I would like to thank you for the efforts you have made in writing this post. I am hoping the same best work from you in the future as well. In fact your creative writing abilities has inspired me.!!!!!!
    26 May, 07:24 AM Reply Like
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