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Let's say a stock was around 60 for a long time (1 year). Now all of a sudden it increases more than 15% in 2 days. Without any earnings result coming or good result anticipated by market and without any other news, the share price rises all of a sudden with a high increase in volumes. Can it be justified by some valid reasons or can it be operators in play?

Edit: Stock is GP petroleums Moneycontrol link

  • As @Victor has suggested, its difficult to know without the stock itself. If you post in the stock ticker then we could suggest from our various viewpoints what the reasons might be – Marcus D Sep 6 '16 at 8:22
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    @MarcusD I have added the stock with link – Totoro Sep 6 '16 at 9:44
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As a general principle the stock price on the stock market is controlled by an agreement between buyers and sellers.

Some initial observations on this stock

  • This is not a thinly traded stock
  • It has traded in a relatively narrow range since March 2015
  • The price rise you observed was large compared to the stock price and the historic variation
  • There are no obvious technical indicators (from a short/medium term point of view) that would suggest a buy signal previous to the 2nd September
  • There are no obvious news stories or new information that would contribute to a fundamental analysis buy signal.

So, my take on this is one/more of the following

  • There may be some 'insider' information that caused the change, that others followed
  • There may have been some clever marketing of the stock in the media/social media, though this is often found out and a price reversal occurs
  • The information we are looking at is summarised to the day level. Some of the high speed trading systems will use transactional data utilising algorithmic trading methods

My suspicion is the latter.

3

It could be an endless number of reasons for it.

It could simply just be a break through a long term resistance causing technical traders to jump in.

It could be an analyst putting out a buy recommendation.

If fundamentals have not changed then maybe the technicals have changed. Momentum could have reached an oversold position causing new buyers to enter the market.

Without knowing the actual stock, its fundamentals and its technicals, no one will ever know exactly why.

  • How can I know the exact reason? – Totoro Sep 9 '16 at 15:11
  • There are many market participant, are you saying you want to know the exact reason many of them decided to buy that stock on that particular day? – Victor Sep 11 '16 at 2:11
  • Yes , is it possible? – Totoro Sep 11 '16 at 16:06
  • Some people buy or sell based on technical signals, some buy or sell based on fundamental analysis, others follow the crowd and do what they think everyone else is doing, some trade purely on emotions, and still others try to do the opposite to everyone else. Usually those that follow the crowd or trade purely on emotions will not get very far and will loose more often than they win. If you think you can try to understand exactly why a stock has made a move in a particular direction, then you are in the wrong game. – Victor Sep 12 '16 at 2:18
  • At best we make educated guesses, that is why it is so important to use risk management, and to understand that you cannot control the market. The market will do what the market will do, no one individual (no matter how big) controls the market. – Victor Sep 12 '16 at 2:21
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The simple answer could be that one or more "people" decided to buy.

By "people," I don't mean individual buyers of 100 shares like you or me, but typically large institutional investors like Fidelity, who might buy millions of shares at a time. Or if you're talking about a human person, perhaps someone like Warren Buffett.

In a "thinly" traded small cap stock that typically trades a few hundred shares in a day, an order for "thousands" could significantly move the price. This is one situation where more or less "average" people could move a single stock.

  • Is there a way to know if operators made the price rise? – Totoro Sep 9 '16 at 15:12
  • @Totoro: "Operators" could be at work in the scenario described in the last paragraph, by spreading news or rumors in thinly traded stocks and causing a large number of "average" investors to buy (or sell) at the same time. – Tom Au Sep 9 '16 at 15:15

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