Tuesday, January 10, 2017

The Untold Story Of The Stock Market

Before I start telling you the story, I just like to tell the readers that I am not "forgetting" about the Singapore Stock Market. Although I am starting to look at the U.S. Stock Market, but I will not forget my roots. I will be updating on my Sabana REIT journey soon...

So let get back to this "Untold Story".

Disclaimer: This is a work of fiction and any similar event/name/situation are just coincidental.

Tom owns some shares of Company A, which was listed. Company A has become a penny stock and no one has traded for a long time. So Tom decided to take action.

Tom had a huge network and told his network of rich friends, Peter, Dick and Harry to buy Company A. He started to accumulated more of Company A too. Furthermore, he advised his friends to buy in different tranches. Thus, the shares price did not increase significantly suddenly.

He also told Peter, who works in a stockbroking firm to advise his customers to buy as well. But Peter not only told his customers to buy, he also spread the news in his office.

Soon, Company A share price rises.

At this point, Company B, which is a huge fund management firm, picks up the algorithm of that Company A share price rises. Due to its system indicating a buy signal, Company B buy huge amounts of Company A.

Company A share price rises much more.

Jim, who is an analyst, saw Company A share price rises. He decided to call the CEO of Company A. The CEO tells Jim of the big plans that Company A decided to engage in. Jim decided the plans seems valid and decided to publish a "buy" report on Company A shares.

After reading the report, retail investor and traders pick up the signal and decided to buy too.

At this point, Company A's share price has rise much more significantly. Despite its initial illiquid nature, it has continued to stay in the "Top 20 Volume" and "Top 20 Gain List" for a few weeks.

Company A's share price is currently trading at triple its initial share price (at the start of the story).

Tom decided to sell his accumulated shares slowly over the period of 1 week. So no one will notice.

Then, he started to tell Peter, Dick and Harry to sell slowly over the week.

At this point in time, Company B's system picks up a "Sell" signal on the share price of Company A. Company B decided to dump all the shares of Company A.

The regulator noticed something is wrong and halted the trading of shares of Company A.

Thus, the victims of this event are eventually the people who are still stuck with Company A's shares.

So what's the moral of the story? 

I will be revealing my answer in the next post. Hopefully no one will ever be trapped in this kind of situation in 2017. 

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2 comments:

  1. This are syndicate. I know of people in Taiwan who do this. They have publisher, brokers, financial and analyst working together to push up stock and retailers end up with broken tales ...

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    1. Hi Cory,

      Thanks for commenting and reading this post.

      This is a fictional story. But I also understand there are cases like this everywhere. I guess we just have to be careful and not get stuck anywhere.

      Regards,
      TUB

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