Teaching You How to Trade Stocks 51: The Pyramid Scheme Tricks of Short-Term Stock-Tipping Commentators

2007/5/9 8:30:16

Chinese people have an especially strong gambling mentality. A single Mark Six lottery can sweep across most of China — even the most remote mountain villages go crazy for it. And the certain characteristics embedded within this are the foundation of any mass movement. In the stock market, those short-term stock-tipping commentators operate like pyramid schemes, exploiting this very mass hysteria to achieve their goals.

There's the most dimwitted kind — those who shill for so-called market makers to distribute shares. This kind doesn't last long. After one or two rounds, it's over, and they can only rebrand themselves. Since there's no sustainability, it's not worth dedicated study. Besides, any market maker whose intelligence is so low that they need to hire shills to distribute shares doesn't deserve this ID's commentary.

What we're discussing now is a different kind of trick with real operational viability. Suppose there's some dimwit who randomly recommends short-term stocks on a website or TV show with over 100,000 daily views. If 5% of people believe it and try buying within the first half hour the next day, that's 5,000 people. If each buys an average of 2,000 shares, that's 10 million shares of buying volume. For the vast majority of stocks, this buying volume is sufficient to give the stock tremendous support and cause a big rally. For the other 95% who don't buy, some reject it because the price is too high, but at least one impression remains: "That stock recommendation was really accurate." In the next stock-tipping game, these become new resources. And some of the bolder ones will buy at even higher prices, creating a capital inflow chain. Those who buy and profit love to brag everywhere, so the participant pool keeps growing until the capital inflow and the loosening of share supply reach equilibrium.

Such a system can be refined into a more tightly organized pyramid scheme: first establish core first-tier members. Members naturally must pay membership fees, and the reward is priority access to buy the first batch of goods before the broader public recommendation. An even more refined system can divide members into different tiers, allowing better control of the buying flow — a gradually expanding pyramid effect. Such a system with fine structure can sustain operations for a relatively long period, roughly evolving into market-maker behavior. The difference is that this market maker consists of many people at different tiers forming an interconnected organization. This has an advantage over ordinary market makers: there's no regulatory risk of one person holding a bunch of fake accounts. The downside is that such a structure has stability problems — at the first sign of difficulty, it easily collapses like monkeys scattering when the tree falls.

For particularly short-term systems that frequently switch stocks, since ultimately the largest number of people get trapped, after a few rounds the external pyramid participant resources gradually deplete and the entire system collapses. So those people appearing on TV or websites every day with N stocks generally don't have long lifespans; one major adjustment can wipe out a whole batch. Of course, each time a bull run begins, you can see similar people appear and then disappear — that's all there is to it. The more long-term systems with fine structure gradually evolve into so-called private equity funds — structures more stable and durable than the pyramid systems described above. This is the evolutionary life cycle of such meaningless tricks in the market.

And the vast majority in the market are merely participating in an unconscious pyramid game, providing sufficient human flesh and bone for the ultimate cannon fodder. At the level of mutual funds and such, that's another game, but their inherent weaknesses leave many attack vectors. Therefore, funds will gradually evolve into hedge funds or more stable partnership structures, where redemption terms and risk tolerance have much greater flexibility, resulting in a higher-order market existence.

The market is like the ocean — there are various life forms here. The reason this ID discusses these things is to give everyone a certain understanding of the survival states of various types of capital in the market. These survival modes will all persist; no single form will dominate. Someone might ask what form this ID belongs to. This ID doesn't belong to any of them. If you must say something, then this ID is of the whale-hunting variety. You must have the clearest understanding of all prey before finding the best attack points and killing them. This ID is only interested in the ocean's largest creatures. This ID only hunts whales — especially herds of whales. The game of killing one whale at a time got boring long ago.

Someone might then ask: hasn't this ID also recommended stocks? That was only so you could study in peace. Besides those fourteen stocks, plus some large-cap stocks that this ID mentioned were just for fighting but not worth retail investors getting involved in, and finally the ones explicitly mentioned — the VC stock 600635 (mentioned around 5 yuan) and the Beijing tourism stock 000802 (mentioned around 10 yuan). Since more than a month after the March 19 interest rate hike until now, this ID has never mentioned specific stocks again. Why? Because there are more and more people here. If this ID continues mentioning specific stocks, it would become a pyramid scheme or be exploited as one. This ID doesn't need anyone to carry the sedan chair. Note: this ID is the whale hunter, not the whale.

Of course, what this ID has said, this ID will be responsible for to the end, because this ID is still in the middle of whale hunting. But this absolutely doesn't mean you should chase high prices to buy now. Actually, for what this ID is hunting or not hunting, the method is the same. This ID wants to teach you the method of fishing so you can find your own fish. The key is what level of buy/sell points there are, not the target. As for discovering that something this ID is also hunting has a buy point, of course you can enter — but it's not about collectively and unconsciously all piling into this ID's whale-hunting targets. Wouldn't that just become a de facto fund? The whale-hunting ship is already bigger than the whale — turning this ID into a whale would be looking down on this ID too much, no?

This ID never likes being vague about things. Including 600635 and 000802, there are 16 stocks total, all still targets being pursued by this ID's whale-hunting ship. Of course, in reality, this whale-hunting ship is pursuing more than just these 16 targets. The specific structure obviously can't be disclosed — there are so many traitors here. Remember what that American old man said back around 2000 points when this ID said he'd be beaten until he was crawling on the ground looking for his teeth? Let's classify these 16 stocks. The earliest batch was from late December last year, the last one from mid-March. Now it's early May. Roughly classifying by the gain after being mentioned — this isn't to show off, but to let latecomers know the entry positions of this ID's hunting, from which some technical issues can be discovered. This ID's entry positions were roughly the same as the mentioned prices. Those who were here early and bought at the time have basically the same cost as this ID, because this ID holds more shares, so the cost obviously can't be lower than yours. But now it's different, because this ID's cost keeps declining. This ID has explained this most powerful method in the lessons without any reservation — just don't know how many people can actually do it.

Approximately 200% and above: 000416, 000777, 000999, 600432, 600635, 600578, 000099

Above 150%: 000778, 600777, 000915

Above 100%: 000600, 600649

Above 50%: 000802, 600343, 000938, 000998

Stocks are merely a minor path, but every minor path leads to the great path. This ID spends time talking here with one purpose: hoping that at least some people here, through studying and self-honing, can ultimately become whale hunters. Secondarily, and more importantly, to go from the minor path to the great path — that's what makes the trip here worthwhile. As for those wanting to turn this into a pyramid scheme venue or coming here hoping to find pyramid scheme trinkets — you've entered the wrong door. This ID doesn't need this many people. As for those who aspire to go from the minor path to the great path, or at least aspire to become whale hunters — if you feel there's a better place, there's no need to stay here with this ID. This ID is only interested in pretty faces, and only interested in pretty faces during 419. As for disciples and followers, this ID has never had any interest. Do as you please — this ID's doorstep can have weeds three feet deep for all it matters.

Appendix:

Did you all enjoy today? This kind of oscillation is simply the most fun game, and this point was already given as the biggest hint yesterday. Today the gap wasn't completely filled — not a big issue, mainly because too many people showed up today looking at the gap, each trying to front-run. As for those with weaker technique, as said yesterday, watch the 5-day moving average — if it doesn't break, just enjoy the ups and downs. That's not bad either.

Of course, the breakthrough of 4000 points can't be confirmed in one shot. The oscillation here still won't be lacking. Technically speaking, an effective hub of some level needs to form here, and then the third-type buy point of that hub must appear to confirm the breakthrough's validity. This process theoretically allows for failure — forming a third-type sell point downward instead — so there's no need to predict anything. Operating by the chart is the only correct approach.

Nothing to say about individual stocks, but I do want to gossip about one question: what do you think those people who claimed before and after the Spring Festival that they wouldn't let Unicom go above 5 yuan are thinking today? You haven't forgotten about the live broadcast of Unicom here before the Spring Festival, have you?

Replies

缠中说禅 2007/5/9 8:32:25

Will append today's market commentary to this post after the close, and answer questions.

See you at 3:30 PM. Heading out first.

缠中说禅 2007/5/9 15:25:06

Did you all enjoy today? This kind of oscillation is simply the most fun game, and this point was already given as the biggest hint yesterday. Today the gap wasn't completely filled — not a big issue, mainly because too many people showed up today looking at the gap, each trying to front-run. As for those with weaker technique, as said yesterday, watch the 5-day moving average — if it doesn't break, just enjoy the ups and downs. That's not bad either.

Of course, the breakthrough of 4000 points can't be confirmed in one shot. The oscillation here still won't be lacking. Technically speaking, an effective hub of some level needs to form here, and then the third-type buy point of that hub must appear to confirm the breakthrough's validity. This process theoretically allows for failure — forming a third-type sell point downward instead — so there's no need to predict anything. Operating by the chart is the only correct approach.

Nothing to say about individual stocks, but I do want to gossip about one question: what do you think those people who claimed before and after the Spring Festival that they wouldn't let this ID's Unicom go above 5 yuan are thinking today? You haven't forgotten about the live broadcast of Unicom here before the Spring Festival, have you?

缠中说禅 2007/5/9 15:31:39
[Anonymous] 球球

2007-05-09 15:27:10
Hi Chan Chan!
I bought some tech stocks — what do you think?

==
Tech stocks are fine, but the real bull run comes in the second phase. Of course, they'll also perform in this phase, especially if they're also index constituents. But tech stocks aren't the market's focus right now.

缠中说禅 2007/5/9 15:35:48
[Anonymous] 水房姑娘

2007-05-09 15:31:34
Chan M, why did the VC stock have such huge volume today?

==
Actually, this ID already mentioned this very gossipily yesterday. This ID said 999 had doubled — that was actually hinting that a washout was coming after doubling. Most people probably thought this ID was showing off. With that understanding, this ID can't help it. It seems this ID will need to change operating methods in the future. This method, used too many times, even the traitors are familiar with it.

缠中说禅 2007/5/9 15:38:29
[Anonymous] 鸢鸢

2007-05-09 15:29:54
Hello sister :)
Staring at the computer all day trading stocks exposes you to radiation! How do you protect your skin, sister?
Hehe, very gossipy, please don't mind.

==

Meditation. By the way, a preview: this ID is starting a new series tomorrow, teaching everyone meditation.

缠中说禅 2007/5/9 15:40:44
[Anonymous] Heng Ling

2007-05-09 15:37:43
Report to Master Chan: I held Unicom for nearly a month, and just sold at a loss yesterday. Who knew it would hit the daily limit up today. My luck is so bad.

==
You need to review how to use the pattern where MACD yellow/white lines first cross above the zero axis and then hover at the zero axis to form a second-type buy point. This is all covered in the lessons.

缠中说禅 2007/5/9 15:43:38
Two Tigers

2007-05-09 15:40:04
Fairy Sister is too adorable. Too bad I always lack the perception to understand your hidden meanings.
Today was basically riding the ups and downs without much action. But total value actually increased compared to yesterday.
Sold some 999, bought 802; sold some 998, bought 938.
Saw 999 rally at the close and silently prayed: "Fairy Sister, please go easy on the 999 washout! It's breaking my heart!"

==

Actually, this ID has been very gossipy recently. That day when this ID deliberately mentioned 999 had doubled, it was actually hinting that a washout was coming after doubling. Most people probably thought this ID wanted to show off something. With that understanding, this ID can't help it. It seems this ID will need to change operating methods in the future — this method has been used too much, and even the traitors are familiar with it.

缠中说禅 2007/5/9 15:49:20
[Anonymous] 缠途漫漫

2007-05-09 15:27:14
Hello blogger,

From Lesson 47: "In the actual movement, after the tick-level divergence of this second wave (looking at the MACD bars at 1443 on the 1-minute chart), the market showed a large pullback, and the lowest position of the bounce was also very clear — it was the last rebound point of this decline, and the close indeed ended at that position. This is also guaranteed by theory."

The tick-level divergence of the second wave — the MACD area on the 1-minute chart didn't shrink. Is the divergence determined from the MACD bars starting to shorten? And why is the lowest position of the subsequent bounce "the last rebound point of this decline"? How does theory guarantee this? This doesn't seem to be the same concept as a bounce back to the last hub after a downward divergence.

==

It doesn't necessarily need to shrink — "not greater than" is sufficient. Moreover, the Shenzhen side clearly showed a decrease. Cross-referencing makes it even more certain. Divergence at a level below 1-minute guarantees a bounce back into the hub at a level below 1-minute — this is of course guaranteed by theory.

缠中说禅 2007/5/9 15:51:34
A Grain of Rice

2007-05-09 15:40:51
Hello Chan MM!
Your theory seems rather difficult to apply to heavily-manipulated stocks, like today's 002042.

==
That stock is no different from the broader market. How can't you handle it?

缠中说禅 2007/5/9 15:52:08
[Anonymous] 黑胶唱片

2007-05-09 15:42:02
Teacher Chan: did you see my question?

Thank you!

=
Sorry, I didn't see it. Please post it again.

缠中说禅 2007/5/9 15:54:29
[Anonymous] 玫瑰心月

2007-05-09 15:46:12
Hello, Master Chan!
I'm a new investor. I opened my account on April 16 this year. To learn about stocks, I've read quite a few books on the subject. They all feel either too theoretical or self-contradictory, especially glossing over the important parts until they're incomprehensible. After reading your method, I finally got some feel for it. Before May Day, using the stock selection method you described — selecting stocks that break above the annual moving average — I picked a few, and they've gained over 10% so far. It's true. Thank you so, so much!!!

==
No need to thank this ID. You must truly learn the real skills — that's what's yours.

缠中说禅 2007/5/9 15:58:13
[Anonymous] 见习者

2007-05-09 15:53:43
Teacher, I've bought Unicom at 3.00, 4.55, 5.64, and 5.80. But every time after buying, it just sits there for a long time. Compared to other stocks during the same period, it rises too slowly. So every time I make a little profit, I can't resist selling. Like on April 30, I bought at 5.68, and yesterday sold at 5.78. Deeply regretting it now. Today I hesitated at 5.78 and missed it.
Remembering what teacher said about being a fickle radish — I'll never do this again.
Please criticize me, teacher.

==

To avoid being a fickle radish getting slapped on both sides, the best method is to master the hub oscillation technique. Look — even a lumbering giant like Unicom has significant oscillation range. If your capital is larger, the oscillation profits aren't small at all.

Of course, ordinary retail investors don't need to participate in these kinds of stocks. Generally, you should only buy when there are relatively large second-type or third-type buy points. These kinds of stocks typically move a little, then lie flat for ages — that's how fat things are.

缠中说禅 2007/5/9 15:59:37
Silly Pig

2007-05-09 15:57:45
MM's series are growing just like the stock market — more and more. The Analects haven't been discussed in a long time. Looking forward to it.

==
It will be discussed. Going forward, "The Analects" will be guaranteed at least twice a week. This week lost a day, so it doesn't count.

缠中说禅 2007/5/9 16:03:51
[Anonymous] 无限

2007-05-09 15:55:57
Oh, sorry, forgot to mention one thing — let me advertise a bit.

My master's practice is especially effective for men in their 50s-60s who want to maintain good health and longevity. (I study Daoist internal alchemy.)

==

If the wandering mind isn't killed, it's useless. Even if you cultivate to the point of ascending to heaven in broad daylight, it's all just self-gratification. We'll discuss this later.

缠中说禅 2007/5/9 16:04:44
[Anonymous] 黑胶唱片

2007-05-09 15:47:08
Teacher Chan:

Is my question too simple?

Why no answer!

Why no answer!

==
Please post the question again. If anyone has seen this person's question, you can also repost it. This ID looked but couldn't find it.

缠中说禅 2007/5/9 16:20:29
[Anonymous] 黑胶唱片

2007-05-09 16:00:38
2007-05-08 09:35:28
Good morning, Teacher Chan. I'd like to ask: does every sub-level divergence constitute a buy point for that stock? For example, 000960 (Tin Industry) on the 30-minute chart — on April 30 at 11 AM, I believe it already made the lowest price. Am I understanding this correctly? Thank you, teacher!

2007-05-08 09:44:12
And a second question: I used the 15-minute chart of 031002 (Steel Vanadium GFC1) and bought at 6.10. Is this what teacher calls a safe buy point?

I hope teacher can see my questions. Thank you!

==
These questions are all covered in the lessons. For me to answer them precisely, I'd have to reteach certain lessons. You should first read through the entire course — at minimum, start from the hub chapter. Otherwise, if your concepts are confused from the start, things will only get harder later.

Also, regarding concepts like "safe buy point" — this ID cannot answer that, because every buy point has a level. What's safe at one level is unsafe at another. Please read through the course first.

缠中说禅 2007/5/9 16:25:41
[Anonymous] 男人不坏

2007-05-09 16:05:41
May I ask, Master Chan: in "The Analects," the two consecutive passages — "The Master said: Alas! Women and petty men are hard to nurture. Get close and they become insolent; keep distant and they become resentful" and "The Master said: Only the wisest above and the most foolish below cannot be changed" — both "petty men" and "the most foolish below" mean the same thing. Why use different expressions?

==
Then why isn't someone's dish necessarily an actual dish?

缠中说禅 2007/5/9 16:28:32
[Anonymous] 天山飞狐

2007-05-09 16:18:08
[Anonymous] 天山飞狐

2007-05-09 16:05:36
[Anonymous] 天山飞狐

2007-05-09 15:53:16
May I ask, Sister Chan: in an a+A+b+B+c upward trend, if b and c segments show divergence conditions when viewed with MACD, does this constitute trend divergence? Must both A and B have third-type buy points to be considered complete? Without a third-type buy point, can b and c segments only be considered consolidation divergence? This question has been troubling me for a long time — eagerly awaiting Sister Chan's answer!!!!

==
This has been emphasized in the lessons. B of course must produce a third-type buy point; otherwise B hasn't ended, and everything is hub oscillation around B. Consolidation divergence is sufficient for that.

缠中说禅 2007/5/9 16:34:58
[Anonymous] 大盘

2007-05-09 16:06:05
Blogger,

Could you briefly introduce how the daily trend classification is applied?

For stocks that have a unidirectional upward movement around midday containing two hubs on the 1-minute chart — I can now automatically find these using a formula each day. If I filter these unidirectional stocks further using the hub method, could this serve as a reference when switching stocks? Otherwise, once you want to switch stocks, selecting one by one is really exhausting.

==

For ultra-short-term operations, the best are those that form a third-type buy point in the afternoon — meaning in the morning it's still the continuation of the original hub, then it rises, a third-type buy point is confirmed in the afternoon, and then it rallies again after 2 PM. Of course, there are many other types — we'll discuss them later.

缠中说禅 2007/5/9 16:40:56
[Anonymous] 白玉兰

2007-05-09 16:34:57
[Anonymous] 白玉兰

2007-05-09 16:21:14
Hello sister!

Today I swapped some Shandong People for Jing Energy.

Previously it would rally before the close every day. But today I got trapped. Is it dangerous?
++++++++++++++++++++++++++++++++++++++++++++

Before the business trip, I'd come to sister's blog every day and had developed some feel.

Didn't expect that after returning from the trip I'd be at a loss again.

Still can't do without sister.

==
Yesterday it was emphasized that all stocks that had doubled needed a washout. Look — today every stock that had doubled did exactly that. This is obviously not coincidental. Moreover, yesterday it was specifically emphasized not to randomly switch stocks, to avoid getting slapped on both sides. These lessons aren't just for today. As for that stock, the medium-term is of course no problem. Short-term, handle it as hub oscillation until a third-type buy/sell point appears.

缠中说禅 2007/5/9 16:42:20
[Anonymous] joyce

2007-05-09 16:23:12
Hello teacher, I was fortunate enough to start studying your "Teaching You How to Trade Stocks" when I first encountered stocks. Currently I'm reading about the "man-on-top, woman-on-top" topic. May I ask if my understanding is correct: 600422 showed two lip kisses, then has maintained "woman on top." It seems I missed the buy point you mentioned — is it still okay to enter now?

==
Those aren't the most precise methods. The real treasure is in the later lessons. Please read through the course first.

缠中说禅 2007/5/9 16:45:18
[Anonymous] Hindsight

2007-05-09 16:35:57
2007-05-09 16:28:02
Copied and pasted 7 times already.
Hello boss:
Haven't asked questions in a while — been studying.
One question: what does the boss think of those "bull market drinks milk" stocks? For example, 600177.

==
These stocks are fine — just a short-term rush that needs a rest.

缠中说禅 2007/5/9 16:47:04
[Anonymous] 白玉兰

2007-05-09 16:25:25
Sister, is the environmental Shandong stock also a long-term layout?

==

These stocks are all medium-to-long-term stocks. No problems at all. When you can't see the medium-to-long-term trend clearly, just look at the monthly chart.

缠中说禅 2007/5/9 16:48:20
[Anonymous] 戈石

2007-05-09 16:45:17
Your Majesty, good day!!!
Meditation? Do you need to sit cross-legged? It gets really numb.

==
Once the blood channels are open, there won't be any problem. But these are all minor matters.

缠中说禅 2007/5/9 16:52:34
[Anonymous] 我

2007-05-09 16:47:35
Chán Zhōng Shuō Chán
2007-05-09 16:05:36
[Anonymous] 天山飞狐

2007-05-09 15:53:16
May I ask, Sister Chan: in an a+A+b+B+c upward trend, if b and c segments show divergence conditions when viewed with MACD, does this constitute trend divergence? Must both A and B have third-type buy points to be considered complete? Without a third-type buy point, can b and c segments only be considered consolidation divergence? This question has been troubling me for a long time — eagerly awaiting Sister Chan's answer!!!!

==
This has been emphasized in the lessons. B of course must produce a third-type buy point; otherwise B hasn't ended, and everything is hub oscillation around B. Consolidation divergence is sufficient for that.
=====
In c, to form a third-type buy point there must be two sub-level hubs: one c1 departure from B, one c2 pullback toward B, both not entering the hub. If there's divergence, does c necessarily have to break above c1 and c2's high points to be divergent? Also, sometimes the expected c1 and c2 don't appear before it drops again.

=
This situation cannot possibly occur. If it truly does, then the third-type buy point simply didn't appear — it's still hub oscillation.

Also, please clarify the concept of trend type completion. If it doesn't make a new high, then you're still within C2 — C2 hasn't even completed. How do you know it definitely won't fall back into the original hub? What we're discussing here are trend types that must be completed.

缠中说禅 2007/5/9 16:54:18
[Anonymous] Hindsight

2007-05-09 16:50:03
[Anonymous] Hindsight

2007-05-09 16:35:57
2007-05-09 16:28:02
Copied and pasted 7 times already.
Hello boss:
Haven't asked questions in a while — been studying.
One question: what does the boss think of those "bull market drinks milk" stocks? For example, 600177.

==
These stocks are fine — just a short-term rush that needs a rest.

===
Thank you, Master Chan. I'm already 50 years old, studying under you. May not have merit but at least I've put in the effort. And I study especially seriously. The text here is so small — I've copied and pasted 13 times before you answered. In the future, Master Chan, please answer my questions sooner. At my age, and you're ultimately still a young girl — studying under you isn't easy for me!
Still, thank you!

==
Sorry, there are too many people. It scrolls to a new page very quickly. Many questions simply can't be seen. Please forgive me.

缠中说禅 2007/5/9 16:56:39
[Anonymous] 见习者

2007-05-09 16:53:56
Since I started with stocks, I feel my temper is getting harder and harder to control. When profits come, I dance with joy thinking how brilliant I am. When losses come, I'm furious and can't stand anyone. Over time, I gradually realized market ups and downs are normal — the key is grasping the trend and learning the technique. But I'm still not the same calm, compassionate person I used to be.
I hope teacher's meditation can help us eliminate our restless mentality, study more calmly, and especially achieve an improvement at the spiritual level.

===

That's exactly why this ID is launching the meditation series. Of course, it's not purely for stocks.

缠中说禅 2007/5/9 17:00:58

It seems the killing energy from stocks is quite intense, so meditation lessons must begin.

This ID has unfortunately been commandeered tonight by someone insisting on a lavish dinner — couldn't push it off. Have to head out first.

See you again. Will post tomorrow morning.