ASIC warned pump and dumpers in chat group

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YPB Group is the latest stock to be subjected to the pump and dump strategies of retail investors as it rose 250 per cent in seven trading days. On Monday 4 October, shares in YPB Group opened at just $0.02 and by Tuesday 12 October, the stock had risen 250 per cent to a high of $0.07. During that time, the volume of shares traded rose from an average of around 4 million shares per day to a staggering 326 million shares by Friday 8 October.

Let's put this into perspective. Four million shares at $0.02 is $8,000 but 326 million shares at $0.04, which was the price of YPB on 8 October is $1.3 million. These figures are important for two reasons: the first is the low dollar value of trading shows that it is retail traders moving the price of YPB and secondly, how dangerous this type of trading is if retail traders can move a stock this fast. So what actually occurred to cause this stock to rise so quickly?

A newly formed group called "Pump and Dump Organization" in a Telegram chat room co-ordinated the pumping of YPB shares. The stock was also being talked about on other chat forums, which I suspect had the intent of pumping up the share price.

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Interestingly, what this organisation was not aware of or chose to ignore is that ASIC had been watching the share price movement of this stock for a few months. So much so, that on Monday of this week ASIC posted on the Telegram chat forum that their participation in pumping and dumping stocks may be illegal activity that could result in fines of more than $1M or even jail time.

What many involved in these chat forums, and indeed most investors don't understand is that ASIC has sophisticated systems to monitor all trading including any suspicious trading. ASIC also knows who is behind every share bought and sold on the stock market and they have recently made it very clear that they are targeting these chat forums, as well social media fin-influencers who talk about financial products including stocks.

So, if you are visiting chat forums or other social media platforms and following or perpetuating talk about a stock or other financial product, you may be subjecting yourself to scrutiny by ASIC.

What are the best and worst performing sectors this week? 

The best performing sectors include Materials and Consumer Staples, which are both up over 1 percent followed by Healthcare up just under 1 per cent. The worst performing sectors include Financials and Utilities, as they are both down over 1 per cent followed by Industrials down just under 1 per cent.

The best performers in the S&P/ASX top 100 stocks include a2 Milk up over 13 per cent followed by South 32 and Alumina, as they are both up over 6 per cent. The worst performing stocks include the Star Entertainment Group down over 18 per cent followed by Ansell down over 5 per cent and Washington Soul Patterson down over 4 per cent.

What's next for the Australian share market? 

The Australian stock market continues to exhibit indecision because while it is just slightly in positive territory this week, it has ranged over 1.5 per cent in price as the bulls and bears continue their battle for dominance. The reason why our market has not really moved is because the Materials and Financial sectors are moving in opposite directions, as Materials is up 1.6 per cent at the time of writing while Financials is down 1.4 per cent

I believe this indecision is only short term and the market should pick a direction very soon, which I suspect will be down given that the rise in the Materials sector this week is not being driven by the big stocks like BHP, RIO and FMG, as they have been rather flat. For the market to fall, the Materials sector needs to fall away and if the big miners start to fall, then they are likely to take the sector and the market with them.

I still believe the low on the Australian stock market will occur below 7,200 points, which I expect anytime in the next few weeks. Right now, it is time to get ready to buy because once the market settles into a new uptrend there will be many good buying opportunities.

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Dale Gillham is chief analyst for Wealth Within (AFSL 226347). He has an Advanced Diploma and Diploma of Share Trading and Investment and more than 25 years' experience in the financial services industry.