To start off with, what is a BB ? A BB stands for big boys and that is a term that is often used in the local stock market circles. It refers to those who have the funds to move the price of a counter and that include funds, syndicates of investors or any investors who has a significant amount of shares in this counter. Collectively, I will simply call them as the marketmaker.
So what kind of business is Biosensors involved in ? As taken from the SGX website, Biosensors develops, manufactures and commercialises innovative medical devices used in interventional cardiology and critical care procedures. Since 1990, Biosensors has manufactured and marketed critical care catheter systems and related devices that are used during heart surgery and intensive care treatment and monitoring. In the year 2000, the Group entered the interventional cardiology market with the introduction of their proprietary coronary bare-metal stent, along with stent delivery balloon catheter system, followed by an expansion of the product line to include angioplasty balloons and catheters.
The Group has internally developed technology to address each component of a drug-eluting stent system, including a stent,, a stent delivery catheter, a polymer and a proprietary drug. The Group is pursuing two drug-eluting stent programs independently, and has licensed aspects of its drug-eluting stent technology to four licensees.
A quick look at the financial statements reveal that Biosensors is not an attractive company at all to own from an investment point of view. It has been making losses year after year and in fact, this company has no retained earnings at all ! Cash flow from operating activities has been negative and most of the cash in Biosensors are being raised through financing activities such as the issue of convertible bonds. Futhermore, this company has no sustainable source of revenue from its operations and relies mainly from borrowing to finance the research and the operations of the company.
I noticed that this counter was under speculation during last year and saw how the marketmaker made use of news to profit from the market speculators. In general, the markemaker will accumulate this counter prior to the release of bullish news. At that point of time, the market would be waiting for news such as the Conformite Europeene (CE) mark approval, which is an international symbol for medical devices that adhere to strict quality assurance standards issued by the European Union. The CE mark approval is of significance because it must be obtained before the stents can be allowed to be sold in the European Union. Furthermore, the approval process for the other regions such as Asia are less difficult thus if the CE mark can be approved, it will help to pave the way for approval in other regions.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
Posts
Yr observation of how the bbs work is basically correct. What u have described is the 'usual' simple straight forward strategy of the bbs.
ReplyDeleteLet me give u some insights of the going-ons pertaining to the bbs' activities behind the scene, which is not easily seen nor understood by the 'clueless' masses.
I'm running out of time here to post a detailed explicit explanation of more of the 'operations' of the bbs......will just name 1 or 2 now.
Certain things to take note if u wish to 'know' more abt these invisible marketmovers......
1. They can and will change their strategies at a drop of the hat if the market sentiment or condition turn out to be unfavourable to their original 'plan'. Meaning instead of going long in the middle of a push....they can (at a drop of the hat) reversed direction and go short. They have deep pockets and the financial muscle to make sure that EITHER way (long or short) they come out the winner. Too time consuming here for me to explain how they can manage this.....but believe u me, they can. I saw it happened b4 my very eye. Those poor 'unknowing' investors, seeing the price start to chiong, will just jump in.....but due to watever reason if the bb does a 180 degree turn....they all got fried. We were nearly caught once with C&G but luckily our own 'godfather' got news of the gang's intention and warned us first. Not a sec sooner too...coz after we exited not long....the price crashed all the way down from its peak and even sank into the red. We are talking abt pennies stock where hundreds of lots are bot at one go...imagine the carnage done eh ?
2. Like u said marketmakers or the bbs are made up of many various type of group of ppl....we called them gangs. In the local context here, u have the brokers gang, the bankers gangs, the businessmen gangs, the fund mgrs gangs etc etc......
When market are really sizzling hot, like the last few years before Jun/July 2007 (before the start of the US subprime woes), there were even foreign gangs foraging in our local market. Such as the Indo gang, the Middle-East gangs, Thai gangs etc.....
Therefore with so many gangs in the market, they are bound to be conflict n disagreements coz each of them will have their own agendas and interests to pursue. When the groups cant agree whether to let the counter/counters concerned fly or extend the accumulation period.....a "war" breaks out.
This is coz one group had already finished their accumulation coz they had more advanced tips abt a certain gd news pertaining to that counter and is ready or had already started to push the price, when another group just got into the picture and do not wish to see the price run up yet. What the general population see on their screen are HUGE blocks of sells orders being countered by HUGE blocks of buy orders....each time some big BUY UPS came , they will be an equally big SELL DOWNS too, and vice versa.
In mid June 2007, there was such a war......we called it the "AZTECH war"....
Long story cut short....time running out now.......our gang got news abt 1 and half week ahead of the other gang abt Aztech going to issue warrant/rights......all of us had already positioned BIG into Aztech ard the sub 50cs mark then.....we started slowly pushing till abt 51/52c when the other group got the news. Of coz they were furious that price had already crept up and leaving lesser meat for them when the 'kill' came.....cant compromise between the 2 groups....we had a 2 days war with them......they pressing down....we pushing up.....threw in everything we had ....even enlisted help of allied gang......happy to say here, in the end we won!
The other group caved in at the last minute of trading when we broke their last defense wall at 54c. Next day, they swallow humble pie and reversed direction to push along with us....my oh mighty my my !!!...Counter opened GAPED UP by 3cts in the morning....ran all the way to 60cs in less than 10 mins.....woooahhhhh !!! Yeah....that was fun....really fun and lucrative too, I sud say....hah!
Gotto run now.....this all the time I got here now....perhaps I may come back to reveal more........perhaps not.
Watch yr steps in the market huh , bro'?.....there's more than meet the eyes. *wink*....
....and oh yea....1 last advice....dun just swallow every words those 'professional' analysts got to say abt stocks.....some are roped into the act by the gang.....haha....one did us a 'favour', if u know wat I mean,mate. ;)
Thanks for sharing on a deeper insight how BBs works. It was very enlightening for me and I found the anecdotes that you have said to be very interesting indeed. I would be very glad if you can share more with me. My view of how the BBs push Biosensors is rather simplistic as I don't really know any BBs personally thus I don't have a personal insight on what is really going on. It came more from my observation for this counter because what was taking place was pretty obvious that there were BBs pushing this counter. Once a piece of news came out, Biosensors will rally with heavy volume and sink down slowly and the cycle will be repeated again :D
ReplyDeleteDuring the raging bull market in 2007, I think the BBs must have made a lot of profits from the swarms of the public that were making their foray into the stock market, hoping to gain wealth in a very short time.
I agree with you absolutely. The market is not that simple and there's more than it meet the eyes. I don't follow the calls of those analysts because some of their calls are so ridiculous they are not in any position to offer unbiased advice. I only scoop up strong companies which are undervalued and hold them until they become overvalued :)
They can and will change their strategies at a drop of the hat if the market sentiment or condition turn out to be unfavourable to their original 'plan'. Meaning instead of going long in the middle of a push....they can (at a drop of the hat) reversed direction and go short. They have deep pockets and the financial muscle to make sure that EITHER way (long or short) they come out the winner. Too time consuming here for me to explain how they can manage this.....but believe u me, they can. I saw it happened b4 my very eye. Those poor 'unknowing' investors, tissot prc200
ReplyDeletetissot mens watch
seeing the price start to chiong, will just jump in.....but due to watever reason if the bb does a 180 degree turn....they all got fried. We were nearly caught once with C&G but luckily our own 'godfather' got news of the gang's intention and warned us first. Not a sec sooner too...coz after we exited not long....the price crashed all the way down from its peak and even sank into the red.new tissot
We are talking abt pennies stock where hundreds of lots are bot at one go...imagine the carnage done eh ?