Hello everyone,
I am very new to this investment game so at the moment my mind is like a sponge trying to absorb as much as possible. I have noticed on the ASX announcement lists that there are a lot of of queries by ASX to companies who seemingly have no idea why their price jumps unexpectedly. Just today there was NGE which jumped to 50% with a little buy/sell frenzy and the company had no idea about it.
Is this evidence of the famous pump and dump tactic or something else?
Thanks!
Welcome aboard, Sab-with-the-Beastly-Number
Shares can rise or fall surprisingly for any number of reasons; your pump'n'dump suspicion is just one of them.
In the case of NGE today, I believe Burglar is on the right track: It only takes a couple of punters to buy in the morning when many might be expecting an imminent announcement, and off it goes. Whether the initiators did it on purpose or in good faith, respondent sayeth not. (It could be an interesting exercise for the ASX to check whether some sales near the top were actually "related" to the initial starters. Wouldn't surprise me at all...)
Burglar was simply using an inappropriate chart to demonstrate the mechanics of it. Rather than an end-of-day line chart, I suggest we look at a one-minute Intradayer like below. (A tick chart would be even better, especially when the moves are in the sub-minute range, like they often are during those stop raids we've been talking in another thread.)
Now, in NGE's case, it is interesting to note that the peak had already been reached by the time the ASX cottoned on and sent the Please Explain notice - popularly known as a "Speeding Ticket". But consider the company's options: If they admit there will be an announcement imminent, they're obviously in violation of "timely disclosure" obligations. In years of observing such exchanges, I haven't come across a single case where the company replied "Oh yes, we told someone in confidence, and he may have started to buy early." It's usually the Sergeant Schultz routine "We know nussink!" Which, again, I can't recall ever to have been followed up by the ASX and found to be untrue.(and provably so)
As NGE fell back right to the starting point, one may reasonably assume that there was nothing more behind it than some traders speculated on an expectation, which proved incorrect at this point in time, so the buying petered out. As is often the case, the sellers near the top will be happy about the opportunity to make a profit, while the gullible buyers that picked the wrong time and price to enter will feel duped.
Welcome to the World of Trading