When it comes to stock prices most people don’t understand why a stock price goes up or goes down. Those who do understand the methodology behind stock price movement, with enough resources have the ability to manipulate the prices in the direction which they prefer. Likewise, companies who have recently been made public well also likely wish to raise the price as fast as possible since these companies on the stock market are trying to raise money for one thing or another. Therefore there are several things you can look for and order to protect yourself from a stock that is moving along on false information rather of then on fundamental analysis.
Stocks are bought and sold at prices which are asked for by sellers and buyers that put a bid price out in order to purchase. Therefore, it’s actually public perception that will move its stock. If sellers think a price is going up, they will ask for higher prices likewise bitters will bid for higher prices and Naturally move the stock in that direction. Likewise, this price movement will also affect analytical traders, those traders who simply watch the price action of a particular stock on a market graph. Day traders of this sort will generally wait for a stock to jump above a 5% move, verify this movement with some sort of news about the stock in an attempt to legitimize it, wait for an opportune time and purchase it stock with the hope to sell it for a higher price relatively quickly
If you keep this general Day trader formula in mind it is simple to see how people with great resources can inherently manipulate stock prices with false news. Imagine that an inside investor of a plastic company holds a great amount of stock at price X. Now imagine that investor puts in the news a self-written article on how their company was named something like an Acrylic Corporate Award Supplier and subsidize the article to appear on the top of google queries involving key words like stocks, plastics, price movement, Consider this the trap for day traders
Now consider this the bait, the investor decides to put out several bids at different price levels inherently raising the price by 5%. Once day traders see this on the scanners, they will immediately look for news. After seeing the news and the price action day trade will then be looking to purchase the stock which the investor will now be selling at different increments of X plus 1, X plus 2, X plus 3 etc. He will raise the stock price as far as possible and then pull out all of his bids. Just the fact that the upper supply is not there any more people will begin to sell. Then the stock price will enter a micro crash on a fear that the day traders will lose their small profit, And in the end most likely the investor will purchase back his original stock at a similar price to what he had already owned it, after keeping the profit.