Pump, dump, pump New York style
In fact, this move was easy to spot even if you did not know anything about GME, short selling, or hedge funds. The trading followed a predictable pattern that I have been talking about in my seminars for 20 years that other gurus have copied. It is “Smart Money,” “Friends of Smart Money” and “Retail Money” that turn into “Sucker Money.”
‘Short selling is a fairly simple concept. An investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender. Short sellers are betting that the stock they sell will drop in price.”
Gotham. “The City that Never Sleeps.” “The Big Apple.” Two professional football and baseball teams. Landmarks known the world over. Statue of Liberty. Madison Square Garden. The Brooklyn Bridge. The New Year is not official until over a billion people watch the ball drop at Times Square. And now, home of the “squeeze of a lifetime” in the history of stock markets.
“A Short Squeeze occurs when a stock jumps sharply higher, forcing traders who had bet that its price would fall, to buy it in order to stop even greater losses.”
It’s been an incredible amount of fun watching all the trading action in the US stock market in the shares of Gamestop Corp. This was the “short squeeze.”
GME is an American video game retailer with 5,500 retail stores in the US, Canada, Australia, New Zealand and Europe. Think of Datablitz and itech as local equivalents.
Revenues in 2019 were $6.5 billion, down from $8.3 billion in 2018 and $8.5 billion in 2017. Even pre-covid, GME lost $673 million in 2018 or $6.59 per share and another $470 million in 2019. Welcome to the digital download age.
Investment funds have been shorting GME since 2017 when the price was $15 to $20. But the significant move on the short side happened in January 2020 at $6 as 2019 numbers came out. The price hit $2.80 in late July. By the middle of 2020, the stock was being shorted by every fund in town to the extent that there were 50 percent more shares being sold by “shorting” than there was public ownership.
As of Friday, January 29, 2021, the price was $325 after hitting a high of $483 the day before. What happened was that a huge number of big boys all got on the same side of the trade of a “bad” company with a “bad” stock that was thinly traded. Average Daily Volume was between 3 million and 5 million shares back to the beginning of 2020 and before.
Some guy with a long-time presence on Reddit, who could easily be a trader on the PSE with an FB group, saw that the short interest— the number of shares that had been shorted—was 150 percent of the float. That means 50 percent of the shorted shares were “naked shorts” (look it up), and that is illegal.
All the “little guys finally won” and “this will change the stock market forever” are nonsense statements. This is simply a matter of someone finding an “anomaly” in the market and knowing how to
take advantage. As in the Philippines, because it is front-page news, US politicians are calling for hearings, investigations, and probes to also get their picture on the front page. All nonsense.
In fact, this move was easy to spot even if you did not know anything about GME, short selling, or hedge funds. The trading followed a predictable pattern that I have been talking about in my seminars for 20 years that other gurus have copied. It is “Smart Money,” “Friends of Smart Money” and “Retail Money” that turn into “Sucker Money.”
With average daily volume at 8 million shares, on October 8, GME trades 13 million and is up 44 percent. The first “Smart Money.”
Average volume goes back to 9 million. The second “Smart Money” is on November 30 at 31 million with the price unchanged.
January 13, 2021, volume moves to 144 million up 57 percent at $31.47 now with the “Friends” buying. With 196 million volume and a price of $65.01 (up 51 percent), the retail money starts in. Was it the “little guys” or the “suckers” buying at $483?
Can this happen on the PSE? No, Yes, and Maybe. No, because short selling is not available yet. Yes, because there are always trading anomalies. Maybe, if someone is observant and experienced enough to see and take advantage of it.