Baosheng Media Group (NASDAQ: BAOS) stock is up 54% this morning already (at 6 am NY time) and it has been higher. There is no particular piece of news that would drive this, no corporate announcement, nothing in the macroeconomy either. A useful assumption is therefore that this is just some minor outbreak of speculative frenzy which will likely enough fade away over the hours. It is true that making this assumption more generally, as we often do, will lead us to missing perhaps one or more really interesting stock market stories and opportunities. But this assumption will also save us from a much larger number of momentum trade chases which would lead to our losing money.
Our contention is that unless we can understand why a stock price is moving then we should be very careful about trading that stock price move. For unless we know what started it, what's causing it, then how can we know when the price change will end, or even reverse?
It's also possible to interpret this as an admission that we're not interesting about stock markets, that we're not willing to have fun and take risks. To which out answer is sure, we take risks, we just take calculated ones. We are, after all, here to try to make money, not for the thrill of the gamble.
Baosheng Media Group stock price from NASDAQ
Given that there is no news here (nothing on the SEC's Edgar for example, nothing in the news feeds) then we've got to try and construct a reasoning for this price move. And sad to say we think it's just a bit of speculation. Something that's common enough in small cap Chinese stocks.
Baosheng has a market capitalisation of just over 8 million (before this price rise) and it doesn't take much buying pressure in the thin markets of early morning to push such a price up. It's possible for the unscrupulous to build a stake, then push up the price and sell into that rising interest. The people who lose out are those late to the ramp party.
It is sadly true that this is - currently - oft associated with China stocks. Not because of anything specific to Chinese people, or their honesty. Rather, because it's a huge economy that we out here don't know much about. So, it is possible to spread stories about how the one deal is going to markedly transform a small company. So, that's what people do.
Now it isn't true that every large stock price move of a China related microcap is just this, a manipulation. But our experience tells us that the vast majority are. Therefore this tends to be a game we're not ready to play.