Identifying Pump & Dump Schemes.

R

redbaron1981

Hi Guys,

This is my first thread on Elite trader as I normally hangout at forexfactory.

To cure my interest today I decided to do a little research into what stocks maybe worth purchasing due to the Ebola outbreak. Stocks such as those in the pharmaceuticals sector along with also personal protective equipment manufacturers.

What surprised me when I googled was how many reports of pumping and dumping of the stocks that might play a vital role in dealing with the outbreak. Please see the attached image of Lake stock.

Obviously liquidity is limited on these stocks hence the large price rises on buying but have any of the successful traders on this forum had any methods of identifying these schemes? It would seem that when you have the herd pushing stocks as much as in the attached example there is large miss pricing that can be taken advantage of either by buying up with the pumpers or shorting when the herd gets scared.

I am not by any means a pro trader but I like the idea of having a lot of one sided order flow to help me into a position and if there were way of identifying this a lot of profit could be made from it.

Your thoughts or ideas would be much appreciated.
 

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your description of pump and dump is not the traditional one. the usual one is where the pump and dump shop control the float and pass along news which they claim is inside information.
 
redbaron1981 said:
I am not by any means a pro trader but I like the idea of having a lot of one sided order flow to help me into a position and if there were way of identifying this a lot of profit could be made from it.

Your thoughts or ideas would be much appreciated.
More...

You may want to look into a scanner that gives you alerts based on specific criteria, such as volume triggers on stocks with small floats, for example. Check out MadScan (MadScan.com), I've used their scanner in the past and it's good. They have a free version and pro version as well.

Most of these "pump and dumps" have a day where the volume surges on a very short period of time intraday, and the key is to get in on THAT day, when the momentum guys jump in. Take a look at the charts of VSR, APT, IBIO, ESI in addition to the one you mentioned, LAKE.

Regarding the short side, they usually become hard to borrow, as the momo players who got in all rush to get out. So the short play is tricky, unless you can time the roll and can borrow the shares to short.

Either you're in a chat room where the guys who play these turds post the picks when they happen, or you're using some type of scanner on your own, the key is to get in EARLY and not be the sucker holding the bag near the top!
 
All seem like good responses guys. I really like the idea of setting up some kind of scanner to detect high volume spikes on low liquidity stocks as the theory really sounds genuine. I actually wonder if there is anyway of gaining access to those forums where they feed the herd there stock picks.

One thing that really sticks out when looking into this is does it really happen so frequently and secondly are the general public really so stupid to take the ideas from these guys?
 
My impression is that the real problem is getting the shares to short. the shares can be hard to find and expensive to short and you're still exposed to the risk of a squeeze.
 
redbaron1981 said:
All seem like good responses guys. I really like the idea of setting up some kind of scanner to detect high volume spikes on low liquidity stocks as the theory really sounds genuine. I actually wonder if there is anyway of gaining access to those forums where they feed the herd there stock picks.

One thing that really sticks out when looking into this is does it really happen so frequently and secondly are the general public really so stupid to take the ideas from these guys?
More...

If it didn't do you think they'd keep doing it?
 
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