Why did this happen then? This is what we call a flush and it’s what the manipulators do ahead of reversals to flush out as many stops as they can. By triggering the stops of other bullish betters, they force them to sell – lowering their entry price and by triggering new, lower levels, they also entice short player to take up new positions.
Why is this a good thing? Because this adds two kinds of fuel for the manipulators on the way up. The short players who get tricked into following the move are forced to cover (buy) as their stops get hit in the other direction and also, the buyers who got stopped out on the way down have to scramble to get back in.
This is a very powerful move and keep in mind the advantage the people who doing the flushing are not "throwing away money" to make it happen. They can take up a short position of their own and then engage in naked selling or even legitimately sell longs they hold at panic prices – TO THEMSELVES! If an operator buys AAPL for $360 in Company A and then sell it for $335 and buy it in Company B – what has he lost?
Nothing, he has simply transferred $25 from company A to company B. If they do this well, they can even create tax losses in both companies on alternate years as well as gains whenever they need a good quarter. More importantly, it means you can use a relatively small amount of money – especially in the thinly traded futures markets, to manipulate massive amounts of stocks, commodities or even currencies. We see this kind of manipulation often enough that we don’t even have to wait to analyze…
