Pump And Dump | Podcast Episode #106

0:00
Hey, everybody. This is Ryan Mallory with Swing Trading the Stock Market. And today, I’m doing my 2nd podcast episode this week. And like I said, in the previous episode, I think I did that on Monday, and then the episode before that, which was like a week ago, and then the other one before that, which is like a week after that one.

0:16
I, I want to do 2 a week. I think you guys are just really getting a lot out of it. I enjoy doing the emails too, when you guys send me those. emails and your stories. I’m gonna try and get to every one of them. I really will, even if it means I have a huge backlog. Um, right now, I’m pretty much up to speed, so send me in your emails, tell me what you think.

0:32
I got, I got a good one from a truck driver coming up next week, and, uh, the guy literally told me he has watched all 105 episodes in like 3 days. Guys, I don’t care what The guy says in the email, you watch 105 episodes of me, I can’t stand myself for 105 episodes.

0:52
Man, I’m gonna put that guy’s email on the podcast for sure. And it’s actually pretty good. I, I enjoyed reading it. It was very long, so I’ll have to cut it down a little bit, but nonetheless, it was a it was a solid, solid story that he has, and I like doing these emails because I think that, A, it gives me a chance to answer some very pressing questions, because if you’re writing me about it, There’s usually a good reason why you are.

1:11
There’s a need there. And so I’m able to help fulfill that need, but not only just for you, but for everybody else because most people can relate to the struggles that you’re dealing with, or at least a large segment of the people that are listening to this podcast can. Like I usually do, I usually have myself a a a good drink while I’m doing these podcasts.

1:26
It loosens me up a little bit, allows me to enjoy the moment a little bit more. This one’s Angel’s Envy finished rye. Um, it’s a 100 proof, so I can’t drink too much of this stuff, right? Or I’ll get too tipsy while I’m recording it. But nonetheless, though, it’s a, uh, it’s a solid drink. It’s one of my favorite bourbons out there.

1:42
It’s just really solid. It’s a rye whiskey finished in Caribbean rum casks. I like it a lot. I think I paid like $99 or something like that for it, but it really solid. I drink it and you don’t need any ice with it. It’s just really good. Nonetheless, let’s go ahead and get started on this particular podcast episode.

1:58
It’s called the Pump and dump. You’ve heard of that before, right? The pump and dump? Yeah, of course, you usually hear about it in the penny stocks, but now we’re kind of seeing it in mainstream stocks. It’s kind of crazy how nutty the stock market’s been. It just goes up every day. The last time I was doing that was back in February. A lot of people don’t remember it because a lot of people are new to trading, but in February, the market was going up almost every single day.

2:17
I, I remember. to a bartender downstairs from my office, and I told the guy that, the stock market’s getting way too easy. I don’t know why it’s getting this easy, but it’s never a good sign when it gets this easy. And so that’s true of the stock market, but it’s also true of these pump and dumps because when you get these things that are going up 50, 100% and you are able to capitalize on it, you start to think this stuff is too easy.

2:38
And then all of a sudden, the dump comes and you get just completely trashed. So what is the pump and dump? Basically, in its most traditional sense, it’s been taking Ill liquid stocks, stocks that don’t have a lot of volume, and they can be very easily manipulated, because when you have low volume, it doesn’t really move at all.

2:55
You have to add some volume to it. Well, when you add some volume to otherwise illiquid stock, it shoots it through the roof. So what you used to have a lot of is people. Actually, from the companies paying people to market the stock. It would be like somebody coming to me saying, hey, I want stock ABC to go up because it’s a liquid, there’s no volume, and these people usually have a whole bunch of shares that they want to cash out for a huge premium.

3:18
So, They, they’d come to, to somebody like me, and they’ve done this before and I’ve never taken a dime from these people. Trust me, I’ve never taken a dime. They’ll, they’ll come to you and say, hey, we’ll give you a million shares of this thing if you can pump it up to your listeners or to your readers and tell them to go buy the stock, and then they start selling into to you buying it.

3:36
And then what is it ultimately happen? Well, the, the buying power gets exhausted and everybody wants to get out that they just pumped it up to. And so they got out at the highest price and then everybody. Else is getting out at the lowest point. So it goes right up and right down. It’s a pump and dump. It’s the most disgusting thing that you can do to people.

3:51
You’re taking advantage of other people. It’s basically stealing and it’s wrong. But you have that out there, the pump and dumps. That’s why I say don’t trade penny stocks because penny stocks are pump and dumps. And for every penny stock that ends up becoming like a, a S&P 500 company that goes from being a few pennies a share to like a couple $100 a share, you have tens of thousands of Penny stocks that never go anywhere that can hardly ever catch a bid, so don’t trade to penny stocks.

4:15
But in any case, that’s what the pump and dump is. But we’re seeing that, like I said, in a lot of regular stocks. You saw it in GNUS. You’ve seen it in NKLA Nicola. You’ve seen it in a lot of biotech stocks recently, particularly those that have been involved in the vaccine race. And so it’s not so much about highlighting particular pump and dump plays that people have. victimized by or made some money off of it.

4:37
It’s more about getting in it, getting out, riding it as high as it will go. How do people do that or how should you do it? First of all, I would say avoid the hype. The key to profiting off of these things is getting in before there is a hype. For instance, I got into SC today. Now, I don’t expect it to do like an NKLA or something like what you saw with silver, but let’s say tomorrow I got in at 1910.

5:00
Let’s say it goes up to 20 and then all of a sudden 25 and 30 and 35 and 40 and it’s trending on stock or it’s trending on Twitter. Everybody’s saying, you got to get into SC, right? Well, I’m not gonna start believing in the stock. I’m gonna know that, hey, it’s getting hyped up for whatever reason, and I’m gonna start taking profits along the way.

5:15
Probably close it out. Now, you don’t have to necessarily get out the same day because there is a lot of hype going on right now. We had it last week with Kodak, if you remember that one, that was crazy. It went up like 24. 100% nuts. But the key to being successful with the pump and dumps is by getting in before anybody else ever does.

5:32
And I hate even using the term pump and dumps because it’s not like a pump and dump in the true sense of like what we saw in the penny stock description that I gave you. It’s more or less just like news headline hits and there’s so many Robin Hood bros jumping in there that they just dogpile this thing in.

5:47
There’s no concern for risking reward, they just pile in and they send this thing shooting through the roof. That’s what you saw with the Kodak. That’s what you see with a lot of these biotech plays. You just see it time and time again. The time to get into these places is not when they start breaking out and start getting like really hyped up and you’re looking at a stock that’s already up 20% on the day.

6:06
You want to avoid a pump and dump, make it your rule that you’re not gonna get any stock that’s already up 10% on the day, and you’ll be fine. But people start chasing. Things when it’s like 1015, 100, 200% higher. You can’t do that. You’re gonna get destroyed. But then once you get in and you’re profitable, this is what I’m hearing from a lot of people, and this is what you’re gonna hear from the story next week.

6:24
And this is I was coaching a guy today, and I heard it this week. You wanna know what? They don’t know when to take profits. That’s one of the big struggles for people is when do you take profits? And it’s hard, it’s probably one of the hardest things because you’re You’re having to make decisions on the fly. That’s why planning out your trade is so important.

6:41
It’s also being smart when it comes to support and resistance levels as well, because if you don’t know about support and resistance levels, you’re not going to know when something fundamentally changes on the charts about a stock. A lot of times where a stock ends up struggling at is at a previous resistance level that you just weren’t paying attention to.

6:58
So once you get in, you got to get in before other people do, and then, If you’re already in it and you’re getting profits, well, that’s great that you’re profitable, but that doesn’t mean that you’re going to leave with profits. The next key is to make sure you leave with profits. One of the best things that you can do is learn to take a third to a half of a position off after you’re up substantially.

7:14
I did that today. I’m in GBTC. I got into it yesterday. It was like 1281. The thing ramped up to like 1,398 today for me. I got out at 1398. I think The thing closed at like 1370, so it was off the highs of the day, but at 1398, it was like very early in the trading session.

7:31
I took a third of my position off, 9.1%. Why is that important? Because all of a sudden, I’ve got a little bit of cushion on my trade. I’m not as fearful of getting completely wiped out on the trade because I just made 9% on it. Maybe it keeps going up tomorrow and I hope it does. And if it does, let’s say it goes up another 10% tomorrow, which I’m not expecting it to necessarily, but I can, especially because it’s tied to Bitcoin.

7:50
It goes up 10% tomorrow, I’ll probably take another third off, and I’ll, I’ll have profits that I was taking at 9% and another that I took at 20%, and then I’ll let the rest ride. See, I’ll be very liberal with the stop loss at that point, because I know I pretty much am guaranteed to walk away with a profit at that point unless Armageddon happens and the thing falls to zero.

8:07
But either way, I know I have a lot of room to work with here because that third of a position, yeah, It’s not a ton. It’s not like a full position, but I can let that thing run. So if it goes from like 20% to 40% or 50%, it still makes a huge impact on my overall returns on the trade. And a lot of that just comes from learning.

8:23
I don’t have to be greedy on every trade. Everybody’s so worried. I was talking to a guy today and he actually felt like he made a bad trade. He did it. He played this cup and handle pattern. It worked great. It shot right through the roof. I think it was SRNE maybe. I don’t know, I could be wrong on that, but it went from $9 to $12 and then after he got out, it kind of went up to like $14 or $15 thereafter.

8:43
And he felt like he made a bad trade. I was like, no, you didn’t make a bad trade. You made it like 30% on the trade. Tell me, in what world is that a bad trade? No, you did good. It was like in a couple of days too. So as traders, you don’t have to get in at the lows and you don’t have to get out at the top. What you want is you want the lion’s share of the move.

8:58
You want the, the meat and potatoes. You don’t need to get the fluff at the top or the scraps at the bottom. You just need the meat and potatoes, man. You make a history of just of eating meat and potatoes in the stock market, you’re gonna do good, man, I promise you. And that’s where writing out the trade is important because once you start taking some of the profits off the table, you reduce your risk some and a stock that you know that is very volatile, you’re gonna be OK.

9:21
Now, it doesn’t mean that you’re going to get out at the top with your final third of a position. I didn’t get out at the top with silver. I think I probably left like 20% on the table with silver, at least. That’s OK. I mean, I made 16%. When I went into the trade, my expectations wasn’t for it to go, you know. Up 40, 50% within a month or so.

9:38
No, not anything close to that. So I had taken some profits along the way and everything and it broke out. I just didn’t expect it to break out like that. That’s fine. It was a trade. I walked away. Listen, when you get into a trade, and then when you get out of it, guess what the stock does after you get out of it? It goes either up or down.

9:54
Do you have any control over that? No. Do I have any control over it? No. It’s the market that decides. And you got to, you can’t make it like personal too. It’s like, man, I knew I should have stayed in longer. No, there’s another trade. There always is, and that’s why I try to always convey to people, there’s another trade. There’s always another trade.

10:09
If you’re stuck in a really bad trade and you don’t know what to do with it, just know that there’s another trade. There’s always another trade. You can take your loss and you can move on, but what you can’t move on from is when you lose everything in a trade. Then you’re raising capital, then you’re trying to get more money back into the stock market. Now, if your bad trade goes against you.

10:26
Know that there’s another trade. You can make it back and you can make it back even better and faster by being disciplined. So when you have a stock that goes up a lot, uh, you don’t have to be in on that. So when you have a stock that goes up a lot, a lot of times what makes people the most fearful is that they’re gonna get out and it’s gonna keep on running.

10:43
Who cares? Who cares? Did you, did you trade the stock with a respect to risk? And if you did, then You’re taking profits along the way, and you can use like moving averages. Moving averages are great. There’s not one moving average that works better than the others, but the, the 55 of them that I use is the 5 day, the 10 day, the 20 day, the 50 day, and the 200 day.

11:01
Those are my most important ones. Some people will use the 100, some people will even use the 200 or 250 day moving average. But those are the 5 that I use. And a lot of times if I start getting this, like, High fire. I’m gonna start looking for what moving average has the stock responded to well. And if it closes below that particular moving average, I know that it’s technical patterns have decisively shifted.

11:22
So that’s what you’ve got to remember. These pump and dumps, there’s a lot of them out there right now. We’re seeing them in a lot of stocks that haven’t even dumped yet. You see it in SQ, you see it in Wayfair, you see it in RH restoration hardware. They’re being pumped to God knows how high, but it, it’s crazy.

11:38
One day they’re going to come back down and you say, well, you can’t have pump and dumps and billion dollar companies. Wrong. You had a pump and dump in the Nasdaq back in the late 90s. The thing went to like 5000 from like 1300 or something like that. I’m not giving you exact numbers, but I know it went all the way up to 5000 and then it dropped 87%.

11:55
And I can tell you, the pump and dump we’re seeing right now in the NASDAQ at this moment is far greater than anything we saw in the 90s. Just pull up a weekly or a monthly chart of the NASDAQ. Go back about 25 years, the NASDAQ.com bubble looks like a blip. You can’t even hardly see it’s there.

12:11
It’s nuts. I, I was looking at it today and I’m like, holy cow, like from 2009 onward, what we have done in the stock market is far greater with all the quantitative easing and 0% interest rates, far more damaging than anything we did in the the the dot-com bubble. So, I mean, that’s why.

12:26
You have $2 trillion dollar companies. Does anybody know what $1 trillion is? I don’t think that I could take $1 trillion and stuff it in my house with $100 bills. Pretty sure there’s not anywhere room for that. And I don’t, I don’t live in a camper and I don’t live in a, uh, mansion either, but nonetheless, it’s a regular middle-class family size home.

12:44
I couldn’t stuff that thing with, uh, $100 bills and I mean, you’re talking about a lot, a lot, a lot of money. Money. In fact, I don’t even think you could stuff $1 trillion into a mansion or, or the White House with a $100 bill. I mean, you’re talking about numbers and money that we can’t wrap our mind around and the Federal Reserve is just pump it right into there.

13:01
They are the ultimate pump and dump. So, in any case, keep sending me your emails, keep sending me your stories. Guys, I will, I will put them on there, man. That’s, that’s one of the things I’m, I’m going to keep on doing. If I get a million, Emails and I’m not that important. Uh, it would be cool if I did. I’m gonna try and do more and more podcasts then to, to support it.

13:18
I’ll keep on doing more and more of them. It’s like David Portnoy, even though I don’t, I don’t like his trading style. I love his pizza reviews. Look, the guy, the guy does pizza every day if he has to, OK? I’ll do the same thing. I will, I will go over your stories on the air. So send them to me. Let me know what you got going on, and, uh, we’ll talk about it.

13:34
It’s gotta be, it’s gotta have some, some meat to it too. Don’t be like, sup, you know, in your email. I’m not gonna talk about that. But anyways, shoot me your emails. And by the way, you want to support this, this podcast, do me a huge favor and go to teespring.com/shaplanner.

13:53
That is a merch store that I have. It helps with the podcast, it helps with the YouTube channel. It’s a cool shirt. It’s a SharePlanner bull logo. There’s some other options too, but the shirts, I’m telling you, they’re the softest shirts you’ve ever seen. I mean, They are really good, really soft. If you go there, if you’ve liked this podcast, if you want to support the podcast and continue to, uh, pay for the expenses behind it, I’d highly encourage you to go buy a shirt, buy 2, buy 3, buy one for your mom.

14:19
She’ll like you more than your other siblings. OK? That’s like the guarantee that comes with the shirt, I think. So anyways, check that out. It’s T E E S P R I N G.com/haplanner. Go to it, check it out. Thank you. God bless.