Plug Power: Some Historical Perspective and Recent Anomalous Trading Activity
March 12, 2014 4 Comments
“Life is beautiful…but luck must be on your side.” - Tivadar Schwartz
I study rare events. Some believe it is my stock in trade. Enter Plug Power (“PLUG”). Someone pitched me PLUG as a short several weeks ago, when it was trading between $3.00-$4.00 per share. For various reasons, I was displeased with the short case and passed on it. I did not transact in PLUG or related securities until the last couple trading days.
Luck was on my side. The stock went straight up over the last few weeks, hitting a high of $11.72 per share yesterday morning…before crashing down mid-day, and closing at ~$6.00/share. PLUG fell nearly 50% from peak to trough, yesterday.
On Monday, I claimed, “If you look at $PLUG historical daily traded value since 1999, you’ll see why I suspect recent criminal/illegal behavior.” I may be wrong, I may be right. I would like to elaborate on my opinion (which I stand by), and explain the underlying reasoning behind it.
Unusual and Historically Anomalous Volume
Note the following:
- PLUG’s 3 largest volume days in its HISTORY (since 1999!) occurred in the last 3 trading days;
- The value traded exceeded its market value in these 3 days.
- The price of PLUG rose 25%, 30%, and 9% (intra-day yesterday) on these days, even as volume rose to historical levels. The 25 % and 30% rise ranked in the top <1% daily price increases in PLUG’s entire history.
- Suspiciously, PLUG share price rise these last 3 days occurred without any headlines, developments, etc. Any positive news (e.g. Walmart blah blah blah) occurred many days ago. So no news, yet historical volume, and historical price increases?
- Nearly half of the largest volume/value traded days of the top 1% largest volume/daily traded occurred in 2014. (that is, if you rank PLUG’s daily trading by largest volume days, 42% of the 1%
If the above set of facts do not disturb you, consider the following: if you and I were playing poker, and I went all-in (bet my entire stack of chips) 3 consecutive times, and each time I won because my hand was a royal flush… which explanation is more plausible:
(a) The probability of such an event is blah blah blah
or
(b) He is cheating
Note how I never have opined on the company’s business, accounting, etc. I simply am pointing out mathematically questionable volume and trading activity. The above behavior can only be explained by the behavior of stock promoters, unscrupulous shareholders, and maybe unscrupulous quant/high frequency entities.
I may update this post later with more. Note that this post is not opining on the near or long-term trajectory of the shares discussed.
I’m not a TA/price action/volume devotist, so I may be way off base here, but couldn’t you have said roughly the same thing regarding the jumps from ~$0.75 to $2.00 in early Dec or from ~$1.50 to $4.50 in early Jan? Each of those instances also represented absurdly high volume accompanied by massive price increases. Just wondering what led you to conclude now was the time to short?
This post does not explain why I shorted. This post explains why I suspect malfeasance in the trading of the stock, among stock promoters, etc. I was simply lucky on the timing.
I expect this era to result in a perilous loss of confidence in market structure as the inevitable unfolds, but my educated guess in the case of PLUG and others is a combination of mania and market structure dominated by algorithms/quants. We are seeing hypercritical market conditions manifest in upside “crashes” all over the place, whether in microcap solar and biotech, coffee, preferred stocks of mortgage REIT’s….it is only a matter of when the instability manifests in downside “crashes.”
Thanks for your comment James. I would like to examine your claims at some point.