Wrong Side Of A Buy-Out: Caught in Market Manipulation
I think most of us know that even though insider trading is illegal, it still probably happens. Mostly because, in order to have deals done, somebody knows something, and there are people who want to be able to take advantage of the deal. I don’t think there is the ability to enforce who knows what, at what time, for every situation. We also know that there are big players out there who can move the market and push price around to grab liquidity for their advantage.
On September 15, one of my stock trades succumbed to both of these situations, which really bothers me because it was a great setup and would have been a very lucrative trade.
An Example of How Market Manipulation Plays Out
GreenSky (GSKY) was perfectly positioned for the next leg up after it had been flagging and consolidating sideways for about a month. I came across it as the price was coming into its daily 21 exponential moving average (EMA) and hourly 50 simple moving average (SMA) along with volume starting to increase. I got the Moxie Indicator™ members into the stock on September 9, and we were rewarded two trading days later on September 13 when the stock price jumped up. Everything seemed normal at this point, and I was looking forward to watching the price appreciate for the next several days. But the following day on September 14, the stock took an absolute nosedive and was pushed down all day long right into the close of the market.
The decline in price abated precisely where our stops were located. I was frustrated for the day because what looked to be such a good trade had suddenly imploded. This promising setup went from a winner to a loser. I chalked this up to more dysfunction in the market because that is what had been happening recently.
It was truly disheartening, however, when I opened my computer the next morning to check positions and GSKY was on my list of tickers to check with overnight activity. I almost thought it was a computer glitch when I saw that the price was going to open over 50% higher than it had closed the night before where I got stopped out. I did some quick searching around on that name in the news and found out that Goldman Sachs (GS) had bought the company out for the equivalent of $12.20 per share.
Stock Price Manipulation Hurts Individual Investors
This was one of the most obvious signs of insider trading with market manipulation I have seen and experienced. You can see in the chart below just how much they moved price around the day before the buyout announcement. So some firm somewhere was able to grab our shares at a cheap price because they could see the stop orders sitting there, and they knew that the news was going to be coming out the next day – it would be worth it to them to pick up our shares in order to keep you from receiving the over 50% gain with them.
Sometimes we benefit from these things and sometimes we get taken advantage of. This one was not in our favor this time. There isn’t much we can do about these, but it’s good to be aware of them so that you understand anything can happen in the market.
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