What Caused this ASX Stock to Rise 250%?

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 $0.002 and by Tuesday 12 October, the stock had risen 250 per cent to a high of $0.007. 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 $0.002 is $8,000 but 326 million shares at $0.004, 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?

ASIC enters chatroom to warn investors

A newly formed group called “Pump and Dump Organization” in a Telegram chat room coordinates 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.

Interestingly, what this organisation was not aware of or chose to ignore is that ASIC had been watching the share price movement of YPB Group for a few months. So much so, that 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 as 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 were the best and worst performing sectors last week?

The best performing sectors included Materials up 3 per cent followed by Information Technology up 1.76 percent and consumer Staples up 1.14 per cent. The worst performing sectors included Utilities down 1.67 per cent followed by Financials down .077 per cent and Industrials down 0.48 per cent.

The best performers in the S&P/ASX top 100 stocks included a2 Milk up 11.63 per cent followed by Oz Minerals up 11.15 per cent while Lynas and South 32 were both up over 6 per cent. The worst performing stocks included the Star Entertainment Group down 13.79 per cent followed by Insurance Australia Group down 5.20 per cent while QBE, Ansell and AGL were all down over 4 per cent.

What's next for the Australian share market?

The Australian stock market continues to exhibit indecision because while it ended the week just slightly in positive territory, it has ranged approximately 1.8 per cent in price as the bulls and bears continue their battle for dominance. The reason why our market did not really move is because the Materials and Financial sectors were trending in opposite directions for most of the week with Materials ending the week up 3 per cent while Financials ended the week down 0.77 per cent despite being down 1.4 per cent earlier in the week.

I still believe this indecision is only short term and the market will pick a direction very soon. My suspicion is that the move will be down given the rise in the Materials sector last week was not driven by the big stocks like BHP, RIO and FMG because outside of the strong rise in BHP last Friday, all of these stocks 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.

That said, last week the market closed at its highest level in four weeks which is a very positive sign. So, while I am still being conservative by suggesting that the low on the Australian stock market is yet to occur, I am prepared for the opposite to unfold.

The only reason I am not being bullish in my opinion at this point in time is because the market has not fallen as far as it would normally into a low. Although this has been the case on two previous occasions since the COVID low in March of last year. 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.

For now, good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.