Posts Tagged ‘Oncard’

Stock tip-sheets?influential or manipulative?

Friday, February 23rd, 2007

How useful and helpful are some of the stock tip sheets? No doubt, some of them are very influential. However, we cannot but feel that their influences border on manipulation. Today, we will give you a couple of examples and let you be the judge.

Today, Eureka Report sent an email to their free subscribers (subscribers who chose not to enrol on their paid subscription) saying,

We don’t want to carp…but you missed it! On Wednesday [21 February 2007] Eureka Report subscribers were alerted to Oncard Ltd, a terrific Chinese loyalty card company backed by Australia’s richest investors. On Thursday the stock rose by 45%. We don’t highlight small stocks too often but when we do, we mean business. Our On Card story is this week’s Eureka Express feature.

In that email, they include a link to their ?free? report which was published on the 21 February 2007: Investment aces back Oncard. In that report, Alan Kohler said,

I plan to buy Oncard shares for my family?s super fund, but not ahead of you. In line with Eureka Report?s policy of always putting subscribers first, I?ll be waiting at least 24 hours. The shares last sold at 21.5ยข.

Now, let us take a look at Oncard Ltd?s price-volume history here. As you can see, on and before 21 February 2007 (the day the report by Alan Kohler was released), Oncard?s has been trading up to $0.21 with average trading volume (the number of stocks turned over) of around a couple of hundred thousands per day. On 22 February 2007, its trading volume skyrocketed to 9.5 million and its stock price surged to a closing price of $0.37. Today (23 February), its stock price rose to $0.41 with a trading volume of 5.8 million. There were no price-sensitive announcements by Oncard leading up to 21 February?the only announcement on that day was the release of a corporate presentation that was made before sometime in February.

Let us give you another example. Take a look at Bolnisi?s stock price history here. From 1 February 2007 till yesterday, Bolnisi?s share price had been stuck in a range between $2.80 and $3.00. At the beginning of today?s trading, it looked as if Bolnisi?s price will remain within that range. Then at some time today, its share price suddenly surged to a high of $3.16 and closed at a price that is 6.8% higher than yesterday?s closing price. Its trading volume surged to an above average high of 3.9 million. Interestingly, there were no price-sensitive company announcements to explain this curious behaviour.

Guess what happened? Today, a stock tip sheet sent a note to their subscribers, telling them that Bolnisi?s share price had breached a technical resistance level, which is a buy signal for technical traders.

We try not to be cynical, but from these two examples, we cannot help but smell a rat. We suspect those are just the tip of the iceberg.