• Jan

Traps on rigged small cap stocks part three



This post is a continuation of the initial two articles about small-cap stock manipulations present on a more and more frequent basis in this market. It is suggested to read the initial two articles first before progressing as the key concepts are outlined with earlier explanations there:


https://www.tradethematrix.net/post/short-traps-on-rigged-stocks

https://www.tradethematrix.net/post/short-traps-on-rigged-stocks-part-two




Deciding between avoiding participating or taking a bold step and joining in



There are two ways to take the approach on this, either trader recognizes the manipulations and avoids trading ticker when identified at all cost (if the trader has a history of poor performance in such conditions) or the opposite of that.

The opposite being that the trader tries to get a read on manipulating actions of market makers and takes advantage of them, instead of being the liquidity target, he/she joins the liquidator and extracts the edge from it or at least attempts to do so.


There is no glory or shame in taking either of those sides (avoid or full participation), in my view trader should be aware of his performance on such tickers that are manipulated and using the skills and past performance on such tickers to make a decision which opportunity option to take, either the exclusion or participation.


From my observations the majority of traders are going to be positioned on either of the extremes, they will ether consistently do quite well on manipulated tickers (those aware of the games) or they will consistently have dificulties and weak performance on such tickers. A trader with no read on traps is just very likely to walk into the same trap over and over again if he/she walks into it for the first time without knowing the process that just occurred behind it.

It is the key to know under which category one belongs. And if one has a weak performance under such tickers, there is always an option to learn and improve, but it has to be done with the right approach of humility and not sizing up on such tickers before solid trap reading skills are developed.


Why an understanding of the manipulator's mechanics is important



The frequent question from a beginner but also intermediate traders is, which part of the whole picture should one focus on? Is it the fundamentals and reading of fillings, or the chart patterns such as wedges, or perhaps reading the tape? What is the key that gives me the edge constantly or if not that at least prevents me from taking large losses due to unusual moves?

In my view (especially judging from the 2020 perspective) having a read on manipulations is perhaps more important than any of the three areas outlined above, especially for very active traders who prefer to trade every single day on every highly active ticker in small cap stocks.

Those traders will be extra exposed negatively if they have poor read on manipulations in a market where manipulations are present every day, this will yield more negative pressure on performance than probably any other factor.

The amount of manipulations in 2020 has increased substantially and the landscape of small caps has somewhat changed in that regards, as the amount of volume traded each day on tickers has increased 5 fold due to all the fresh influx of new traders, all of which gives riggers new opportunities to set traps on such tickers more frequently.

Again not everyone will belong to that category where a read on manipulations will pose such a critical piece to the puzzle.

For traders who are very selective, only trading their very specific playbook plays with just one or two trades per day (in-out) the read on manipulations might be completely secondary or not even that, therefore placing the priority of getting knowledge in some other areas will be more important.

But from my observations the traders who do need to place a lot of attention to at least try to understand the games of manipulations are very active traders who like to trade trough the day the majority of small-cap tickers, when rigged tickers are printed back to back day by day those traders the most frequently are in trouble.

Find which of those describes you to see if you should continue reading the article.



The pain threshold of retailer and the price at which float is locked for rigger




When it comes to manipulated tickers two major variables are dictating how far the rigger might push the price either into squeeze or into the targeted wash.

1. The pain threshold of the average trader when in negative P/L

The first being the pain threshold of the average retail trader participating in the asset. At which price from the current average price that ticker has traded over the past 1 hour will the average retailer (who trades on margin) start to feel significant draw down on a position, what is the price where this effect becomes cumulative. If you want to observe I would highly suggest that you observe the conversations of few different groups of traders in either Discord, Slack, Twitter, or other communities between experienced, less experienced, and beginner traders. Note where those communities on specific ticker start to feel annoyed or are thinking to stop out, if you observe this long enough (specifically on manipulated tickers) you should start noticing the common patterns and it will all make a lot more sense why riggers push the price the way they do and to the prices they do.


2. Float lock at X price, and the free room above range extremes

The other part of the equation is the free room that the rigger has to push the price away from his locked average on the float. The rigger once he locks the float will not have an unlimited room of price on how far he can swipe it either direction, since at some point the negative P/L might be too severe or the cascading negative action placed on the rest of the participants might be too severe, trapping rigger at bad prices, which is why on average they very carefully weight how far is far enough to wash price from key support level to shake out longs (but no further), and how far they need to squeeze to shake out shorts (but no further) to not get risked absorbing too much liquidity at extreme high prices where the only way to get rid of that liquidity than would be to take a loss on it.

Both above concepts are the constructs of why and how far the riggers might push price, but there is the only key note to keep in mind, it is all visually / chart relative. This means that the trader should focus all attention on the chart pattern itself to identify the possibilities of wash/rally targets and nothing else. Using the common Type 1 / Type 4 pattern as outlined in this blog many times already is the key to base the projected likely trap targets, it's all about chart visuals since the rigger will control the float usually within the neutral part of the range of the ticker itself in most cases.



No pre-set biases, use the toolbox / playbook and wait like a hawk





It is a wrong perception to think that retail traders can guess well when the large players will squeeze short-sellers on ticker or dump into longs even before the market opens. This is amateur chit-chat around online communities but there is little to no value there.

To extract the edge one needs a proper trap based playbook of all the tricks MMs like to use, and then being patient and adaptive to let ticker and order flow confirm if either scenario is likely to happen. This means to succeed on scenario outcomes with decent reliability rate the ticker has to trade for a while in the first place, at least 30 minutes usually after market open. Or in most cases more than 1 hour actually. There is no such thing as trying to guess ahead too much, but there is such thing as having multiple potential scenarios and then the one that suits potential playbook case to execute or anticipate on such one. This is especially applicable to tickers that are manipulated by single large trader/fund.


There is a good balance on how much anticipatory the trader should be, if you try to front run riggers too much your win rate is likely to be low, if you are too slow you will get caught in a trap likely. Time, liquidity, volume clusters, float...there are many variables at each moment help to identify whether the ticker is likely being rigged and is trapping either side of the market for liquidation.


"Chart painting" with float locking




"Float locking" is the term used when the large player/manipulator absorbs a strong portion of the available shares that trade on the open market to have full control over the price moves (or at least the major moves) to paint the price structure exactly as he wants it to (hence the commonalities of Type 1 / Type 4 chart patterns). There are several reasons why the manipulator would want to do that.


The procedure is to not lock the 90%+ of float (because then other traders would affect the price too much) but rather to lock between 50-80% of float so that there is still enough of free float available for other traders, which allows smoother soaking of additional liquidity and market maker can more smoothly re-distribute or re-accumulate at dynamic prices bit by bit and still maintaining the overall control over the price well. The idea is that there needs to be a decent amount of float still open for other trades to grab on so that they can be liquidity targets for manipulators on both sides of range extremes up or down.


Conceptual example:




But locking a decent portion is the key that the market maker has to ensure to be "painting the picture" within his desired result. Once the float is locked by the market maker and by other participants towards 80 or 90% around the neutral price range then any strong move away from that neutral price is easy to achieve since any fresh extra liquidity will cause a very quick and sharp move, which is why on small float tickers those biggest liquidation swipes are often achieved on not that much of volume at all, yet the price goes very quickly into the strong rally or wash mode.


This is the basic concept on why any market moves strongly upward once the demand exceeds supply or moves strongly down once the supply exceeds the supply, but in reality, in the majority of markets having a read on that kind of moves is very difficult if the float is big and no single player has a lock on the float. All of this makes those extreme moves much easier to read in small-cap stocks as the float is much smaller and traders can potentially see where the market maker is now controlling the liquidity.


It's one thing to talk about theories of markets and oversimplified statements such as "price goes up when demand exceeds supply" but it poses very little practical use in the majority of cases. It's the other thing when you can apply this concept practically in very specific assets under specific manipulated conditions. There is a lot of theory out there in the trading world but not much practical use case behind it, or at least not specific enough.




Identifying if rigger is still locked in position using the float lockup



One concept that small caps trader should be aware of is if the ticker is rigged and there is no major volume on the washes (relative to the size of float, or the amount of potential shares that rigger might be holding), the chances are that rigger is still holding position, and reclaim of price to the upside is that much more probable.

Watching volume on key support washes is critical to get a read whether the rigger might still want to squeeze or not, especially the washes of strong and clean support levels intraday.


Conceptual example:



The last two hours are often indications for short squeeze moves if there is no major high volume rug pull and if the ticker is rigged, so count the wash volume. High wash volume has to be present concerning float size to invalidate the squeeze, else the squeeze is always in play.


Very high volume HOD breaches are often fakeouts if there is high amount of stops being shaken out (high volume anomaly on clearout).


One critical price level to always watch on rigged tickers is high of the day or HOD level and the amount of volume the price trades once breaching it. Again the key is not just a test of the level but breach as well, since what we look for is a clearout of the level and potential high volume cluster of stops to be positioned above such level from short sellers. If the level is breached on high volume (has to be a significantly higher volume of average traded volume per 1-minute candle) then chances are that rigger was able to trigger stop-loss liquidation and in many cases, the pull will follow soon after that.

Lower volume breaches of HOD levels are more frequently followed by continuations while high volume breaches (especially high volume 5X+ avg) are more likely to be followed by reversal or fake breakout soon after that.


This leads to the fact that trader should pay strong attention to the volume that ticker trades above HOD level on its breach to identify whether the breach might be sustained or potential fakeout, but it should be noted clearly that this applies only to the rigged plays, not just any type of financial instrument at random HOD breach.


Example of high volume breach of HOD level followed by reversal on ticker NAOV:






"Painting the charts"



Very clean symmetric behavior of range propping is often an indication of rigger intentionally creating even symmetry so that both long and short traders place stop losses or stop out at very clean even-ed price locations, making it easier for the rigger to know exactly where to absorb that order flow, thus charts are "painted" with the right agenda in mind.


Two ways of trading the rigged ticker:


1. Front-running riggers game with adding into averages but being exposed to much larger drawdown if using stronger position size, and potentially much bigger loss. Playing on one sided directional move towards later hours.

2. Anticipating riggers move and stopping out earlier in front of him if on the wrong side of rigger (means more cuts, but better RR and control on the overall risk). Playing on the micro moves in between before the major directional move happens towards later hours.




Micro-shelves





Plenty of attention from previous articles has been given to the value and importance of micro shelves. This concept is very significant and perhaps one of the best risk-to-reward concepts on rigged tickers that traders can take advantage of. It is as well potentially the easiest one to grasp (from all the trapping plays) and the trader should place plenty of attention to it. Not every rigged ticker will be present with the concept of the micro shelf but on average there are enough cases that it presents great addition to an extra tool in the playbook to read manipulations better.


As previously outlined the name "micro-shelf" comes from a visual description of the price structure that the rigger will set to unload his long position, which tends to form sort of a shelf-like formation with tight price structure bound on both sides tightly (usually not more than 1 candle size in width).

Rigger will in such case prop the bid to ensure that the shelf remains holding for 10+ minutes, meanwhile, as short covers hit the tape he will unload his long position into the short covers by selling into the middle of the shelf or at the upper part of the shelf, depending on where the covers hit the tape (as bid).


Traders should always be on guard for very unusual very clean symmetric structures on rigged tickers since those will in most cases be artificially set traps by single player-rigger and not the majority of random market participants. Those kinds of actions will often be the reversal points of the moves. Thus once the clean shelf building activity starts to present itself (which will be early visible by clean bid propping at a very precise price level again and again over at least 5 or more candles back to back), that is where the trader should start paying close attention to potential shelf formation.

Ideally, the trader should be short into the middle of the shelf expecting the rug to pull out of it, while risking just above the shelf highs on short position.



The key component is however that the shelf has to be set at the end of the extended move to the upside. The shelf has to be present after the price had a strong and significant push, those micro shelves tend to deliver the rug pulls with a relatively high statistical rate.


Example of the micro shelf on the extended move in ticker GTEC with small float where the rigger was accumulating and pushing ticker into strong extended move just after which micro shelf was formed and the top was set, followed by rug pull. Ideal opportunity for the trader to short into and wait patiently to short the extended move into clear anomaly rather than guessing top with averaging up into the move.




Below is the outline of the move that resulted after the micro shelf, not always there is such severe fade present, but if the shelf is after a very extended move such as GTEC chances are it might be:




One thing to always keep in mind, to spot the micro shelf effectively you need to use a 1-minute time frame or lower so that the structure of the shelf will be clearly visible as there is a special relationship between volatility and time that has to be met in order for the shelf to be visible. If you trade from too high time frames such as higher than 5 minutes you will be unable to spot it.




Once the rigger absorbs a large portion of liquidity into an extended price move he will want to get rid of that liquidity with as minimal loss as possible into the neutral-current price, and the micro shelf is a tool to achieve that to as much of an extent as possible. Collecting as many chasing longs to unload into them at high prices, and collect short covers who are in negative P/L to unload into them as well, meanwhile, the rigger will be propping the bid at the lower part of the micro shelf to ensure that shelf remains holding, looking like as if someone has strong intention to keep pushing the price higher, forming a deceptive trap.

After the rigger unloads as much as he can (and the liquidity stops hitting the tape) the rest of his size will be rug pulled (hard to know how much of overall position, but it's the average per 100 samples that counts). Using the word "he" and not "it" or "she" to define a rigger since I am quite certain it is not a female due to the savagery behind the rigs nor is it fully automated algo since there is a lot of "orchestration" that has to be done. Most likely algorithms are used in between when the agenda flipping is being made.


Ticker CBAT with microshelf example below. Two solid micro-shelves with clean rug pulls, especially the first one on the left after strong impulsive move, just enough to form breakout above previous high and liquidity zone to scare short-sellers into covering (those who held trough the day) and to trap some chasing longs. Resulted in a clean rug pull after. Most likely in such cases rigger will try to fill as much short as possible since he knows if he traps plenty longs up in the shelf the pull will be strong therefore placing his short position in nice positive P/L. Whether that is a single trader behind playing both sides or a wolf-pack of traders really does not matter, for retailers all it matters is to get a read on the trap.



Micro-shelf example on ticker DPW (picture below) from its strong run during mid-day, ending with micro shelf, topping out and pulling strong.

The value of spotting micro is in the ability to accurately identify potential tops rather than just guessing and averaging short into such running ticker. This is very often the issue that short-sellers have on manipulated tickers, they are unable to identify that ticker is trading artificially high volume relative to its float (manipulated) and they begin to fight the top way too early, wrongly identifying that the rigger is not yet done.

One should join short only when the rigger gives a clear hint on unloading (unless scalping). Or if not that then at least waiting for clear parabolic extension or stuffed high volume anomaly.



Micro-shelf example on rigged Chinese ticker WEI followed by fade after the shelf, on the picture below. Usually shorting into shelf gives at least 5 RR opportunity if using the micro high of the shelf as actual stop loss and 1R distance (shorting in the middle of shelf as entry).


Micro fake breakouts with heavy stuffing



Relatively frequently present play on the manipulated tickers is micro fake breakout of very symmetric consolidations (manipulated action/ chart painting). Those types of traps are usually set on strongly extended tickers, often soft parabolic moves where the market maker will set clean topping structure, then breach it just a little bit to trap some breakout long liquidity, and then pull the rug altogether. Those are often a great short plays on high RR, especially if price stuffs heavy into such a move. Watching volume and the tape at such a moment is critical to note the valid entries as well as plenty of trading experience since those are not easy to spot for beginners.



Example of micro fake breakout on ticker AKER from November, where the rigger sold few times into the spikes / pinbars, then pushed for fake breakout and rug pulled it soon after. Those are often good shorting opportunities if they are set on extended moves that last 1 or more hours. Short entry is ideally when the price starts to trade back under the breakout level with no-followtrough to the upside.


Example of two similar plays, both micro fake breakouts on strongly extended moves. But what makes the example on the left that much higher grade play is the fact it stuffed on much higher volume relative to the example on right. It pushed through structural highs and stuffed quickly back down meanwhile trapping plenty of longs.

This is the ideal case for shorting such play. With heavy stuff above the fake breakout level. Those kind of anomalies are often the tops of extended moves/tickers. One thing to note, for short seller to participate in such entry it is important to hit the bid and not place limit order on ask, since it is very likely that one will not get filled in such case.



Micro fake breakout traps are present on all sorts of market moves, but the ones that are the most tradeable are where (1.) the ticker is heavily extended after a multi-hour run upwards, or on (2.) the ticker where the supply is strongly in control, the ticker is on backside and rigger has just pushed into a fake breakout to shake out short-sellers and as soon as that is done he rug pulls creating instant stuff with rotation down. Both of those are two ideal wider picture situations to use the trap as initiation for a short entry, outlined below on conceptual case (left being the case 2. and right being the case 1.) :





Example of ticker ATHE on 16th November, where the concept on the left (picture above) was used (micro fake breakout on the ticker with supply in control), in fact, the rigger used it twice in a row.

Both of which were clean opportunities that short sellers can take advantage of.

Wait for price to breach key level and stuff back down instantly under the level to initiate short entry.



And another example of heavy stuff on fake breakout on the ticker CRVS from October where the supply is clearly in control, the rigger will just push to shake out short-sellers and then rug pull his position. If one is shorting the stuff ideal stop-loss is always above the stuff candle, if proper rug pull is in play the price should not reclaim the stuff candle highs. Use the distance between current price and the candle high as a 1R distance to weight the appropriate size for your position.





An example of micro fake breakout on extended ticker with a multi-hour run. Fake breakout was set and rug pulled soon after, resulting in solid top giving short-seller plenty of RR in participating in such trade. The lows cleanly rotated for first time into lower low just after the fake breakout, giving further indication that top might be in.




Micro fake breakout example on ticker MOHO, this one is slightly wider as it did not reject and fade that quickly, but the same concept applies once key level failed to hold and there was no further bidding to sustain it (was more clearly visible from tape rather than a chart in this case).




Example of stuffed breakout on DSS followed by instant pul on picture below. After rug pull there was clean micro-weakness into support signaling further breach likely:



Another example of rigged ticker UUU (late October 2020) with wider fake breakout stuff and rug pull, followed by micro shelf into weakness and full rug pull. Both of those gave excellent short opportunities, combining both of the playbook sections outlined for rigged plays above. This was especially clean very high volume stuff above key range highs, such asymmetric action (note the asymmetric composition of volume) is always the result of strong manipulations present).






Volume forecast and the volume relevance to the float size



Volume forecasting certainly has its place in trading of small-cap stocks, and especially in forming potential scenarios whether the stock might be potential squeezer or fader more likely than not, but when it comes to rigged tickers on smaller floats under 4 or especially 2 million its value meters will often not provide much insight whether the short squeeze is likely or not, since even low volume traded tickers will often be the ones with squeezes in such case (even that VF might indicate further fade likely).



Often rigged tickers with smaller floats (under 3 million shares) will have weaker liquidity and volume, yet many of those will squeeze even though that the volume trough the day will not exceed the pre-market volumes at drastic over-performance.

The reality is that it's not that just the volume that ticker traded on the day that matters to determine if rigger might or might not squeeze, but rather what sort of price structure has the ticker/rigger formed, and where the VPOC (volume price of control) level is. It's a lot about balancing those variables together to identify if the ticker might be a squeezer or not. But always keep in mind one thing, the more clustered the VPOC level is, the more likely the squeeze might be on. The more densely packed are shorts together around similar price over certain period of time, the more likely it is for rigger to squeeze. Conceptual example below:





Volume forecast over-performance is not a necessary component for a short squeeze in the mid or late day as many small float tickers can squeeze even on relatively small volume, often just 100k per M1 candle will be plenty enough to swipe price at great distances especially if the rigger has locked plenty of float and there is lack of offers from other sellers/participants.

If rigger is the only major potential seller on the asset (as he is the key holding buyer that locked the float) then the only major offers on assets are his, and if he is the squeezer....there are no major sellers. If the only real potential seller on the asset is not willing to sell (and is instead pushing for squeeze) then there is no real resistance currently present. This is absolute key component to understand once trader notes that float might be locked by single participant (or a wolf-pack).


To sum up the words above, below is the example of ANPC ticker (mid November) which was clearly rigged even though that the volume traded on ticker trough the day was quite weak relative to the volume forecast projections, but it did not stop the riggers from setting the short squeeze on it. Also note from image example above how the VPOC was very clustered together, giving ideal opportunity for rigger to squeeze since short sellers were packed together at the similar prices. And also make sure to not assume that anything of this is random. The rigger knew exactly how to prop the support and resistance to "paint" the chart with intent as it was. Hence the term "chart painters". Creating clustered VPOC for controlled short squeeze later on.







Types of the most common traps (Type 1 and Type 4)





Previous two articles on the blog about rigged stocks already touch upon the concepts of the most common trap patterns that riggers like to use such as Type 1 and Type 4 traps. Each of those serves its unique purpose and they probably use them depending on the strength of liquidity/volume/float at least from my observations it seems so.

Meaning the higher the volume, the lower the float, and the tighter the liquidity the more likely it is for the rigger to set Type 4, which is the most powerful trap (they clear both longs and shorts in this trap).

While if the liquidity and volume are weaker and the float is somewhat higher (7+ mil) then chances are leaning more towards the Type 1 trap where they only tend to go for short-sellers.


Both of those traps are the must-to-learn concepts as they tend to recycle those two the most frequently, pretty much over 80% of rigged tickers will have either one of those two trap concepts used and applied. Short seller unaware of those two traps is a short seller exposed to the losses with a much higher probability on such tickers.


There are few common concepts to be aware, such as (1.) consistent lower highs, (2.) flat-lined demand level (clean artificial support propping), (3.) float rotation, (4.) key initiation on high volume above rotation level.

Perhaps the most important one to identify is the start of initiation on high volume, as that is where the squeeze will start signaling trader to cover if short or to join long. These key rotation/initiation levels tend to stay the same, relative to how the trap is structured, always with the start of the move above the last current lower high (for short squeeze). So watching on the volume and strong push is the key (out of nowhere).



Some of the Type 1 plays from the last few months (short squeeze trap with HOD clearout as target to stop out short sellers):


Ticker DGLY from November on Type 1 trap, very clean agenda based aggressive push into HOD to cause the scare effect and trigger short sellers into covering right where rigger wants them to (to unload long position into covers above HOD).



On the image below ticker KZIA from 18th November with Type 1 HOD clearout play and very clean initiation (clear strong push on high volume into fresh high), followed by the even cleaner formation of the micro shelf. Notice how cleanly the rigger has propped the bid on the micro shelf for 10-15 minutes before eventually pulling it all together. As noted above with intention after the extended move to collect all remaining short covers from other participants, long chasers, and as well probably to fill the short position for themselves just before they rug pull on the remaining of their long position.





Type 1 example on ticker KXIN, in mid day, followed by HOD clearout. There was no rug pull followed by HOD clearout on this one however, only further run so this one was only successful play if played on the long side, while the short above HOD level would fail and result in stop-out. My preference is to always long right at the key rotation level where the initial first blue circle is and hold long into the fresh HOD. There are many ways on how to trade Type 1 but my preference is on confirmed rotation.




Type 1 play on ticker SPI with HOD clearout on image below. This was slight hybrid of Type 1 and Type 4 since rigger micro flushed the demand to shake out some longs just before they started the squeeze. Again this behavior is set so that rigger shakes out as much longs as possible before initiating the squeeze, since any long not shaken into the weakness will likely turn into profit seller at higher prices, making it harder for rigger to squeeze higher. There is no conspiracy behind why riggers often "paint" very clean even support on chart of Type 4, it is done with intention to ensure that once this support is washed out every long still present in ticker will basically form the same decision on selling at the same price under support at the loss, where the rigger scoops up the offers.




Type 1 play on ticker LYL in late October:






Some of the Type 4 plays from last few months (combo long swipe and short squeeze):

Example of strongest Type 4 play in past few months on ticker DNK (Chinese ticker) where they pulled 2 strong Type 4 traps back to back before eventually fully running into HOD clearout as a Type 1 play. Combo overlap of multiple Type 4s with a major Type 1 at once. Powerful rigging on this ticker trough entire day. The ideal play is to long all key rotations of reclaim of underwater demands as noted on the chart itself. Again this is just my preference since there are many ways to go about it.



(Same ticker DNK below) Each time the demand was heavily rug pulled to shake out longs before they run it higher to shake out shorts as well. This behavior is present on Type 4 trap where rigger shakes out longs so that he does not need to fight this liquidity when he wants to squeeze the shorts (as those longs in the money would then turn into sellers and be an obstacle for push).




Type 4 play on the ticker AYRO from late November, amidst the hot EV sector run. They have set this trap early in the first 30 minutes of market action, which is slightly more unusual to be that quick, but since there was so much liquidity in the whole sector it made sense for riggers to pull it that early. Underwater demand reclaim was the key long trigger and selling long into fresh high of the day.



Very strong Type 4 play on ticker WEI on image below. Possibly one of the strongest rigged tickers of this year. The key was to look at the initial wash under the clean trendline that there was no volume on wash, which meant that the floor propper/rigger is still holding the majority of size, which makes the reclaim very likely unless further high volume wash would have followed. This is an extremely important variable for a trader to look for, once the rigger has locked a large portion of float, for bearish thesis trader needs to see very heavy volume washes, else something is off, and the rigger is not the actual seller but someone else, making reclaims to the upside more likely.

Also note how clean they "painted" the support on the ticker, goes to the point mentioned on article above, none of this is random, it is done with intent so that it triggers cumulative response from other traders right under the clean levels once they are breached, where the rigger shows up with a bucked to soak up the offers and forms a squeeze.




Backside clearout plays from past 3 months:



When it comes to backside short squeezes keep one major statistical data in mind, the majority of those late day backside squeezes will end with fade and not further squeeze into HOD and beyond. Important to play on this variable with short once the price breaches backside clearout level, the data favors to the downside from there and squeeze being done, giving short seller frequent opportunity to join in. Stepping aside once squeeze is in progress is the key and then joining in with short once the backside liquidity level is breached, usually there is 5 RR or higher on such play.


The statistical data is outlined on conceptual image below, but keep one important thing in mind, this only applies specifically to backside short squeezes at late hours, not just any random situation:


More about backside clearout has been mentioned in previous blog articles about short traps. Those are mostly set on smaller float tickers with decent liquidity and volume present at midday or later hours.

Rigger usually runs the price just above where all in-the-money shorts are to stop them out and then they flush the remaining shares out.



Ticker KXIN with backside clearout on image below. The key to those is to time the initiations well, it's not that easy usually, it might take 2 or 3 attempts with quick cutting (if one wants to join the long into squeeze).

Shorting after clearout is usually easier as it is cleaner to define where the exact backside liquidity level is and where short seller should join in. Usually, those give at least 3 or 5R on the fades.




Another example of backside clearout on ticker WWR, which is very similar to the example above from ticker KXIN. Ideal short entry is at the clearout level risking just above it and aiming for at least 50% of the squeeze to fade.




Backside clearout on ticker VVPR, which pulled strongly once the task was complete. Always look left on the chart to identify where in-the-money shorts might still be in, that is the level to which the riggers will squeeze.




Backside clearout with rug pull example on ticker MDDR. Look on the left of the chart to define where that level is and where in-the-money shorts potentially sit after the first major wash from the actual top near HOD.

Rigger will press with buying power just enough to form a squeeze and as soon as covers stop hitting the tape he will pull the rest of the size, depending on how thick the liquidity is. He might be able to pull it quickly or might need to do it slowly if liquidity is weak (below case is an example of strong backside liquidity).



Another intraday example of the same ticker MDDR and two smaller backside clearouts that followed. They recycled the same trick three times in row. There are no coincidences there, this is all targeted behavior.



Backside clearout example on ticker SGBX. Again look on the left to establish from which price the in-the-money shorts sit, usually this means excluding the actual strong top-wash on the left if it was set after major rally since there are no major shorts sitting in there.





Fighting the rigged ticker with emotions





Strongly manipulated tickers can push traders into emotional drain much easier than other tickers since riggers will use different cunning tricks to ensure the most wicked traps to play out. It is very important to stop trading such ticker if the trader is having a poor read on the manipulations and is already in bad mood trying to fight the loss back.

The psychological danger of fighting rigged ticker on constant micro-whipsaws without having a decent read on what the rigger's intentions are can easily lead to much deeper losses.


My approach is, I either have read on manipulation on the ticker of the day, or I do not. In cases where I do not, I exclude myself from taking trades, because the research history of rigged tickers has taught me well, to never underestimate the cunningness they can put forward. The basic rule is, if you traded ticker for 2 hours and you stepped in the majority of traps with negative P/L result, chances are you will step into further traps because you read is off.




Know when to stop out and where to set a stop



Using too wide stop losses at key targeted areas of LOD or HOD levels/locations is a bad idea in overall larger sample size on rigged plays.

It is important to set stops earlier than that. Usually above the rotation level of last high is where the trader should ideally stop out (if ticker is rigged). Image below shows that with notation number 2. Stopping at number 4 (where majority do) is what rigger wants you to, and should be avoided. There is no need to take that extra loss distance just because trader feels more secure by placing stop loss much higher above key HOD level. (assuming one is short from the middle of structure)


The image below is the outline of middle supply and demand levels and the outer key HOD and LOD levels which of two are where the large portion of traders likes to stop out, which riggers take advantage of. The thinking process of a typical trader is, "if price breached HOD and there is no further resistance higher I have to stop out here for good". This is exactly why the rigger will push the price into that level and then often start unloading right here if he manages to get enough short-sellers into a cover frenzy.




But having too tight stops on the heavily rigged ticker and with the poor read on the manipulation can result in just as much damage as a trader is constantly stopped out before that one trade that eventually works. It's very likely for a trader to mentally get drained by such action and decrease further performance/actions.


To outline why placing stops above HOD level if one is short is a bad idea (using simple data gather from November):

-If the ticker is indicating potential Type 1 play across 12 rigged tickers in November nearly 90% of them had HOD clearout!

This means that if you are stopping there you are by default being a liquidity target of the market maker, and stopping at the worst price possible. Again this applies to tickers that somewhat indicate Type 1 structure within 2 or more hours of traded action.

In other words, if the ticker is potentially indicating Type 1 or Type 4, the stop out should be much sooner than at the HOD level.


There is delicate balance on where the stops should be placed on rigged plays so that you avoid setting wide stops at obvious HOD/LOD levels (which are often cleared out) and as well to not use too tight stops and getting shaken out frequently.




Having the right mindset when trading rigged plays



From personal observations of hundreds and hundreds of rigged tickers over a few years, there is one major mistake that traders often make when judging the behavior on those plays. They perceive the behavior of ticker as cumulative weird behavior of the crowd and the squeezes being the result of mass action of traders, rather than looking the tiger into its teeth and seeing the reality for what it is. The key initiator is a single-player (or group of few), not a mass. The mass only joins and exaggerates the key moves once riggers start initiation, they are not the initiators, however.

Think of it like in Batman the Dark knight, there were only two initiators who were the cause-effect of the majority of cascades (positive and negative ones) within the movie, the rest was just fueling the fire and exaggerating the initial moves, there were only true two initiators within it, however (shaping the actions of the rest to their own game). Having read on either one of those makes the whole outer secondary actions much more predictable than trying to read the chaotic thinking process of the masses (secondary players).


Every micro action contributes, but the real ones that matter and provide insight into the future are the ones of initiators.




Conclusion (fresh retail blood enters the market at mass in 2020)




If there is one lesson that 2020 gave us is that the increase in new trading accounts and fresh retailers has increased many significantly. And yes while this is at large due to the corona-virus situation it is also worth to note many of those traders once they get a bite into the game they won't leave, and especially with the increasing ease of opening new accounts, and the increasing liquidity in markets, in general, the access to trading in future will keep growing with new beginner capital entering the markets.

Especially years like 2020 can increase the volume of fresh capital at such peace that it makes it that much more valuable for manipulating market makers to trap this liquidity in all the different tricks they use. It is therefore more and more important for a retailer to be wary of such behaviors and to prepare at higher frequency going forward. And this does not exclude any market whatsoever, especially the most prone are small-cap equities and crypto, as that posse the most asymmetric order flow and consistent retail participation where a single player can get a hold on liquidity and swipe the price into needed directions to achieve certain agenda.


Just for the sake of clarity, all the above examples given are my trade attempts on the tickers, not just theoretical examples cherry picked from the past, since everything might sound easier to point out and explain from the past rather than to actively see it as its forming on live market. All the cases above are traded on daily basis, using each of the sub-section of the playbook to use those traps to execute on.


Going forward the chances are that the levels of manipulations in small cap equity markets will increase, making it that much more important for retailer to get familiar with those concepts.




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