Stop Losses and Bear Raids
If you have been following the Star message boards for any length of time, you have been warned about using stop losses. I’m sure most of you know what stop losses are, as well as how and why they’re used. But in recent weeks I have been asked to explain them on two occasions by people I thought would have known. So given the environment in which we currently find ourselves with STSI, I thought I would post on this topic just in case there is someone who needs this information.
There was probably a time when automatic stop losses were a good thing much of the time. In fact, several paid services/advisors made them a cornerstone of their “system”. By setting a “stop loss”, you were limiting the amount you could “lose” on a particular investment and freeing up that money to reinvest elsewhere. If that stock price dropped to your pre-set stop loss, your order was filled, your stock sold, and your losses limited. But in today’s world of in-depth market knowledge and high frequency program trading, using stop losses for small to mid-cap stocks sets you up to lose.
If you are long a stock such as STSI; the manipulators, market makers, hedge funds, and shorts are your enemies. You never want to give your enemies any more knowledge than you absolutely must. If they know where you (and others like you) are willing to sell, then they can manipulate the price down to get your shares. Maybe they want to buy your shares or maybe they just want to use your sell order to help them drive down the price; but regardless you end up out of your long position for a loss.
Whether it’s STSI or some other small or mid-cap stock; IF YOU ARE USING AUTOMATIC STOP LOSSES THEN YOU ARE SETTING YOURSELF UP TO FAIL! If you still want to use stop losses, keep them in your head and enter them when the price reaches your target. There are also other ways to hedge your position such as with options.
We have seen this scenario time and time again with STSI. During the day, they drive the stock price down substantially but then it recovers, often on the same day. However, I believe today’s price action is different. I believe that we are in the beginning phases of a bear raid. If they do not make another push to drive the price down this afternoon, they will keep it near current levels or below and launch another short attack tomorrow. Also, expect some strong FUD (fear, uncertainty, & doubt) material to appear. The last time the shorts needed some serious help, their friends with Bloomberg News published a completely fraudulent report that Star was about to be delisted from NASDAQ. There were ONLY 13 million official shorts back then, now we have 25 million shorts who do not plan to go gently into that sweet night.
Be mindful, STSI has been a playground for manipulators and shorts for a long time. And it’s surprising how often it happens that in the days leading up to a good news announcement for a company, their share price plummets on rumors of “bad news”. This gives the big boys a chance to acquire a position, or cover a short position, at a good price. They are not supposed to have inside info, but isn’t it amazing how things always seem to work out for them.
So remember the reason you bought and held the stock in the first place. Is it more likely that the “bad news” is true, or that someone wants your shares because you were right in the first place? Whether you know it or not, you are playing in the big leagues now; but even the big leagues have playground bullies that want to steal your lunch money. Don’t be scared out a stock that you believe in, just at the time when good news may be pending…
GLTAL
