Sell The News!
I’m sure you have heard the phrase ‘Buy the rumor & sell the news’. It has come to be associated with bagholders selling into the anticipated rise in PPS and squaring their position. True, but only from a shareholders point of view.
Many times the brokerage houses are informed of PR’s prior to it ‘hitting the wire’... It was originally meant to help the MM’s prepare for increased action to a particular stock. This too has become corrupt.
In many cases a press release is used to undermine a stocks value by the procedure of dilution. Foreknowledge of a perfectly timed, positive press release could trigger a massive buying spree. The assigned brokerage house works in unison with the company to release a huge number of shares to unsuspecting buyers but the price moves very little. Both the company & MM’s profit from the maneuver but the public is scammed. As you can see ‘sell the news’ has a different meaning within the industry.
Now once again think contrarian. MM’s believe your actions will conform with standard market patterns, standard language, phrases, terminology and such. You, as a stocktrader have been passively trained to use this language style & so function in accordance. They now use this training against you.
In ‘3 shakes’ I mentioned the word insidious. In some cases where there is no massive dilution (that’s... No Massive Dilution) the phrase ‘sell the news’ has again a different twist. It refers to the MM’s applying real volume with sell characteristics. They will use actual volume to create a stall. People are buying but the PPS is not moving.. It resembles (that’s ‘resembles’) a dilution and causes doubt and fear in the minds of the shareholder.
There are two paths to this strategy:
1) If the TA is gagged people will misread the indicators. Because they are blind and may have a history with dilution their fear of an imminent dump causes them to sell their position.
2) If the TA is ungagged the strategy can work to delay the PR. Let me expand.... A positive PR (ex: Biggest Gold Strike in History!) will attract Day Traders, fence sitters, corporate buyers etc.. When a stock is aggressively shorted and MM’s are seeking an alternative to cover, a PR is unwanted.
In some cases, when they are informed of a prearranged PR, MM’s will negotiate a ‘delay of release’ when its not to their advantage. Gambling on the ignorance of the general shareholder MM’s will advise the company ‘they will stall’. When you see a sudden rise in PPS, for no apparent reason and then settles back down, more than not this is the occurrence. Inside people buy in anticipation of the PR but it never develops. It ends up looking like a P&D, creates bagholders & delays the MM position to a more advantageous time.
By contrast a surprise PR could cause a halt in trading. The stock usually reopens at a higher price but not for reasons you think. Its all about getting an estimate of what price to again short the stock. MM’s consider this an underhanded technique and from this point become adversarial with the company. Many companies have been destroyed by this very tactic.
What MM’s want is to artificially manufacture volume without getting deeper in the hole.. Remember they want to buy shares not sell them. Sure they’ll take a percentage but bypass the rest forcing a higher purchase price. Sound familiar... Enter the BullShake, in fact, the quicker they get to the downside of a BullShake the better. All done to discredit the company & neutralize the news..
To my thinking this is a weak protocol but at this point in the struggle they are all weak. We CDIV shareholders have the benefit of knowledge, strategy, & perseverance. Our teamwork has effectively removed the element of surprise used against the wary trader for decades. Any of these tactics will be useless against CDIV but with regards to the future, the next time you see a press release try to view it with contrarian eyes.. Blue
