trading bible, page-22

This ranged from "the media misinformation campaign, to the bringing of pressure on the ASX and finally to some of the most manipulative trading practices I have ever seen in the days leading up to and immediately preceding the suspension and reinstatement of the stock to the boards".

While the share records show no sign of a secret accumulator, some trading was unusual. On June 16, Melbourne broker Opes Prime bought 49,950 AMI shares and sold the same number.

Over nine days, its buying matched its selling almost exactly on six days.

State One Securities in Perth matched its buying to its selling on nine days out of 11, culminating in June 29 when it bought and sold 346,111 shares while Opes bought and sold 111,214 shares.

The effect was that on a day when AMI had announced a huge extension of its indicated reserves to 59 million tonnes, up to 40 per cent of the trading was State One and Opes churning over stock.

There are many legitimate reasons for such trading, but it gave the inaccurate impression that the booming turnover in Cudeco shares reflected growing interest from investors.

This was accentuated because, for the past year, the ASX has blocked identification of brokers buying or selling shares on the SEATS trading schemes - everyone except ASX regulators are in the dark when stock starts to move.

As a result there was no reason to doubt that the booming turnover in AMI reflected growing interest from investors.

Day traders didn't know who they were talking to on investor forums, where the information they received came from, or who was doing the buying or selling. They saw only the price going up and wanted a piece of it.

In total, Opes bought and sold 2.24 million shares for $9 million and ended up losing $98,000. State One Securities cleared $272,000 after selling a net 272,000 shares in $7 million turnover.

IMC Pacific had begun trading options for its clients, selling AMI ordinary shares for $3.9 million while buying an equivalent amount of options that could be converted into ordinary shares to fulfil the selling order.

Allowing for conversion costs of the options, AIM ended up with a profit of $83,000 even after the shares collapsed.

It appears that Aequs hoped to do the same thing, taking advantage of the gyrating share price to buy options to cover shares it was selling. In the three days to Monday July 3, when AMI closed at $2.93, Aequs bought a net 82,000 shares at an average price of $2.40.

Aequs managing director Drew Metcalfe declined to comment on trading by clients or whether Aequs had received the Martin Place report, but said Aequs had not bought or sold any shares on its own account.

A copy of the Martin Place draft report had reached The Australian. The newspaper's story the next day quoted an unnamed broker referring to AMI's find as "one of the most important mineral discoveries of the past 20 years", valued at up to $US17.5 billion, with a $25 price target for the shares.

The story electrified the market. Aequs set the tone by taking 19 per cent of the opening trade on the Tuesday morning.

Buying at the opening bell took out many of the sellers, signalling intense interest in the stock while leaving reduced liquidity. As the share price passed $5, Aequs began selling heavily.
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By the close, Aequs had net sales of $3.2 million in the shares, but its options buying had fallen behind, leaving it 341,565 securities short of balancing, if this was its intention. If so, it needed to buy more stock to avoid being caught short.

Buying options to settle share sales requires slick timing to convert the options within the three-day settlement period. Any delay by the company in issuing the new stock can leave the trader short of stock. This would be a company-induced short squeeze.

It's not known whether either of these factors affected Aequs's clients.

For whatever reason, on Wednesday morning Aequs went out even more aggressively for stock, taking a massive 26 per cent of the strong opening trade, then dominated the buying in the opening minutes.

As sellers disappeared, the CommSec day traders swarmed for the stock. Aequs picked up 7000 shares at the top of the market 24 minutes after the opening, but by then it had virtually stopped buying.

When trading was suspended at 10.58, Aequs had recovered to be up 42,000 shares and options over the five days at a cost of $688,000. With the cost of converting options, its clients were down $1 million.

But the big shareholders were laughing. Even after the share price collapsed, the 60 million shares and options that Martin Place, Aequs and State One Stockbroking had placed with their clients for $3.8 million were worth $213 million.

AMI (now Cudeco) was forced to cut back the size of its indicated resource to 25 million tonnes. But the share price ensured that all of the 2006 options were exercised and CuDeco raised $11 million from converting options. Its future was now secure.

If not for the manipulative trading and bad press that forced the share price down when Cudeco resumed trading, it would have been a happy ending for everyone, Trade4profit told the AFR, showing that McCrae had shrewdly managed to lock out the "suits" and big miners "for the benefit of the little guy". Not just the little guy. When a HotCopper admirer asked if Trade4profit had made $1 million or was it $2 million, he replied that it was a rude question, "especially when many in fact have done so".

Life moves on. Two weeks later, Trade4profit was talking up tech stock Quickflix, which had just taken a big placement from a high-profile investor. Trade4profit was spruiking Lachlan Murdoch.

What they said

If you want to know what the definition of a d.ckhead is, these guys [the doubters] symbolise it. I don't know why we've been forced to defend ourselves.

Wayne McCrae, on those who doubted Cudeco was sitting on a copper resource worth many billions of dollars. July 7, 2006

Wayne has never bulls . . . ted me and he said it would be the biggest copper find in the Southern Hemisphere. Wayne is not a big noter - he is just a polite, ordinary bloke.

Cloncurry publican Jim Telford. July 2006

This is a very volatile stock that is particularly favoured among the day traders. It is very much beholden to rumour and innuendo.

Fatprophets analyst Gavin Wendt after Cudeco shares gained more than 50 per cent in a week and then sagged on news of an exploration delay. September 2006

This is a once in a lifetime opportunity. It will play out like no other story in recent times.

Trade4profit (t4p) on HotCopper

You are indeed a stock god t4p . . . I for one grovel at your feet.

Geogeaux, on HotCopper

The drilling reports go right over my head, that's why I follow the thread on HC to give me an insight as what the reports actually mean.

Simonne1, on HotCopper

I went for a ciggy, up 20G, came back logged in now up 5G and in a trading halt. What the . . .

Timzed on HotCopper

I paid $10, what happened, I went for a coffee and it was $7.

Scanbox on HotCopper

I paid $10 too. Noooo.

Aarogon, on HotCopper

I can't believe that anyone on here is stupid enough to question t4p given his track record.

Dannyf on HotCopper

They have testicles the size of ants.

Wayne McCrae, blaming brokers for talking the share price down.

People's arsxs are getting kicked and the stock exchange is under pressure.

McCrae on the pressure to buy Cudeco stock in July.

He was quite excited to speak with me when I revealed who I was, suggesting ". . . some of your earlier numbers on Las Min . . . they were like you were inside my head. It was amazing".

Trade4profit on his first conversation with McCrae. He stresses that no information came from the company or brokers.

There is definitely a lot of angst and feeling amongst shareholders, and whether or not there will be a case, we still have to find out.

Slater & Gordon partner Michael Magazanik on plans for a class action against Cudeco, citing an investor who lost $200,000 from his superannuation.

RISING FORTUNES

Cudeco Share price

May 29

Directors get 10 million options

May 31

Cudeco reports new discovery

Jun 1-2

Wayne McCrae buys 729,500 options

Jun 29

Cudeco reports 59 million tonnes resource

Jul 3

Martin Place report circulates

Jul 5

Aequs buys $4m shares

Aug 17

Cudeco extends copper strike

Sep 5

Cudeco misses drilling update

Sep 12

Cudeco reintroduces director options