04/08/2023
THE CURIOUS CASE OF SINGERBD
AND
THE FALLACY OF GOOD NEWS
On 23rd July SingerBd realeased its Q2 eps. EPS was 4.72 for April-June 2023 as against 1.4 for April-June
2023. The company further stated that the EPS increased due to increased turnover, GP margin,
operating profit etc. The earnings results were extremely impressive, as in percentage term its over
237% rise Q on Q.
Simply excellent, mind blowing, fantastic and so on. Such performance should have propelled the stock
price of SINGEERBD through the roof. It actually did do just that, but for a mere 30mins and several days
later no one is interested in buying SINGERBD stocks.
So the million dollar question is ‘why’ even after such Good News the stock is buyer less? In this article I
will like to use VSA theories to explain how smart money uses the fallacy of Good News to trap small
investors.
For every stock that has seen rise and fall, it has to go through a cycles of phases.
VSA terms these phases as:
1.
2.
3.
4.
Accumulation
Mark-Up
Distribution
Mark-down
The 1st stage of every stock movement is accumulation. In this phase the Smart Money acquires a large
quantity of the stock at the lowest price possible and it usually takes place in congestion areas.
Congestion areas are mostly sideways range bound movements where the stock appears to have no
interest to move either up or down.
The smart money ensures that the stock is contained below a certain upper level which is the supply
area. At the same time the SM also supports the price above a certain lower line which is the support
area. The SM absorbs most of the floating supply or stock through this process. We all know about the
meteoric rise of BEACON PHARMA’ don’t we? Have a look at its monthly chart. The stock was in
accumulation for a period of 8-9 YEARS. SO was BSC.
Anyways there are few stocks going through such congestion phase right now. Have a look at the charts
of BPML/BDCOM/JHRML.
So once the SM has accumulated enough stocks it becomes easier to rapidly mark the price up since
there is very little of floating supply left who can generate sell pressure. SM within a very short period of
time marks the price up to a much higher level. The actual theory in practice is lot more complicated but
I am just generalizing it for easy understanding.
Now, in Distribution phase is where the SM has its entire headache. They are holding a pile of stock,
which they bought at relatively low price, they have marked up the price, but the problem still is how to
sell at higher prices? I mean how to create buy pressure when the price is so high. This is where they
employ their trick of realizing good news. You will see “good news” being published at times when the
stocks have to be off loaded. Good news such as massive increase in EPS as is in the case of SINGER BD,
or HIGH DIVIDEND, Factory Expansion. Export orders, and so on.
When public reads about this GOOD NEWS they turn into willing buyers and this is the time you can see
that SM is offloading their holding to the general public who are willingly buying.
So coming back to SINGERBD, if you look at the chart after the day of news release, you can see clearly a
massive surge in volume. Whenever there is an ultrahigh volume bar it is always SM selling. SM probably
sold more the following days (the volume were high) and a week later the stock is unfortunately buyer
less.
So what in this article I have tried to convey to my fellow group members is that, next time, when you
read about a Good News, before deciding to buy, please open our charts and give it a second thought?
Thanks.
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