Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The "Blueprint" for Stock Market Manipulators

Companies / Market Manipulation Mar 18, 2013 - 08:15 AM GMT

By: Money_Morning

Companies

David Zeiler writes: While they may have perfected the trading strategies that use retail investors as patsies to enhance their profits, Wall Street titans like Goldman Sachs Group Inc. (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM) didn't invent them - that honor goes to a man named Richard D. Wyckoff.

You may not have heard of Wyckoff because he died in 1934. But the book he published in 1931, "The Richard Wyckoff Method of Trading and Investing in Stocks - A Course of Instruction in Stock Market Science and Technique," became the blueprint for Wall Street's big investment banks shortly afterward, and remains so to this day.


A stock runner at age 15 (that was in 1888), Wyckoff opened his own brokerage when he was just 25. He studied the habits of the most successful traders of the day - Jay Gould, J.P. Morgan, Andrew Carnegie - with the goal of synthesizing what he learned into a comprehensive market strategy.

Wyckoff first set out his ideas in a popular 1920s newsletter, "The Magazine of Wall Street," eventually publishing them in book form.

Wall Street traders eagerly adopted Wyckoff's strategies, which emphasized technical analysis but also outlined how big players could exploit less sophisticated investors to earn huge profits.

It's been a popular Wall Street game for over 80 years.

"The truth is that Wall Street has stacked the deck against you," said Shah Gilani, Money Morning Capital Wave Strategist and editor of the Wall Street Insights and Indictments newsletter. "That's why you need to understand how the game is played. Otherwise, you'll end up a Wall Street patsy."

The Richard Wyckoff Trading Strategy
What's most striking about what Wyckoff wrote in 1931 (and said in his newsletter prior to that) is how closely it matches what we see happening on Wall Street today.

Once a big operator has identified a stock ripe for trading, Wyckoff said, it will gradually, quietly accumulate a position in it to avoid tipping off any other investors.

In this stage, the idea is to buy the shares as cheaply as possible with actions that drive the price down. So the big trader "raids the market for that stock, makes it look very weak, and gives it the appearance of heavy liquidation by sending in selling orders through a great number of brokers," Wyckoff wrote.

Mechanisms to keep the stock price from rising too high during this phase include strategically selling large blocks of shares while spreading negative news about the company in question.

This strategy also helps weed out most of those who want to sell the stock, help setting the stage for the big run-up to come.

Ideally, the big trader tries to accumulate the bulk of his position right before some major positive news breaks - news that the trader knows about or expects to happen.

"You have often noticed that a stock will sell at the highest price for many months on the very day when a stock dividend, or some very bullish news, appears in print," Wyckoff wrote. "This is not mere accident.

"The whole move is manufactured. Its purpose is to make money for inside interests - those who are operating in the stock in a large way. And this can only be done by fooling the public, or by inducing the public to fool themselves."

Just before the positive news breaks, the big trader buys even more shares, creating strong upward momentum that dupes less sophisticated investors into buying and driving the stock toward a target price.

After the news hits and the stock peaks, the big trader will sell part of the position into the frenzy of buying by retail investors who think they're getting a hot ticket.

For the weeks after, the big trader plays the earlier game in reverse, keeping the stock near its peak while unloading shares until they're gone.

And then the trader shorts the stock, slowly building his short position as he did his long position.

When it's time to cash in for the second round of profits, the big trader cancels any buy orders he had made to prop up the stock.

"The specialist in the stock then tells some of the moreimportant floor traders that the stock is in a weak technical position and that there is no support for the next 8 or 10 points and they all get together and raid it down ... at which point the operator covers his shorts," Wyckoff wrote.

Of course, at this point it's the investors who bought at or near the top - mostly of the retail variety -- who take a bath, while the big trader counts his profits.

It Just Happened Again
If you have any doubts this is going on every day on Wall Street, just look at what happened with Goldman Sachs and the recent sale of H.J. Heinz Company (NYSE: HNZ) to Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) for nearly $28 billion.

Goldman had to be aware that the Berkshire deal was brewing, yet maintained a rare "Sell" rating on Heinz right up until the deal was announced Feb. 14.

In fact, Goldman went out of its way to reiterate its Sell rating in a Feb. 10 report, lowering its price target to $53 from $54 and saying it expected the stock to "underperform as top-line growth continues to disappoint."

As the Web site Zero Hedge pointed out at the time: "What does a Sell rating really accomplish? Well, in this case, and in all such cases, it merely provides the firm's prop, pardon flow, traders the opportunity to accumulate the shares its "clients' are advised by the same bank's sell-side group to Sell, preferably to the bank in question."

HNZ rocketed from just over $60 to $72.50 on the day the deal was announced.

Meanwhile, the Securities and Exchange Commission (SEC) is investigating a sudden spike in Heinz options trades that originated from a Goldman account in Switzerland one day before the deal was announced.

Whoever made the trades pocketed about $1.7 million.

The episode is a reminder to retail investors that they need to keep an eye on the Wall Street big boys to avoid becoming their trading fodder.

Gilani said investors need to abandon the buy-and-hold strategy pushed on them by Wall Street's "experts" and instead "think like a trader. Know what entry points are good places to buy. Know what points are good selling points. Trading means having a plan.

"The way to play the Wall Street game is to do what they do, not what they say you should do," Gilani said.

[Editor's Note: If you're fed up with the rampant corruption, double-dealing, and protection of Wall Street by Washington (at the expense of the taxpayers on America's Main Street), then you need to read Shah Gilani's Wall Street Insights & Indictments newsletter. As a retired hedge fund manager, Gilani is a former Wall Street insider who knows where all the bodies are buried. But unlike most insiders, he's not afraid to tell you where they are. He's also got some pretty good ideas how to fix this mess - and how to protect yourself until the cleanup takes place. Please click here to find out more. The newsletter is free.]

Source :http://moneymorning.com/2013/03/15/the-wyckoff-legacy-82-years-of-wall-street-profiting-at-your-expense/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in