High Close

A high close is a tactic used by stock manipulators, who make small trades at high prices during the final minutes of trading to give the impression that the stock did very well.

A high close occurs at the end of a trading session in the financial markets. The closing price is the price of the final trade before the close of the trading session. These prices are used to create traditional line stock charts. They are also used to calculate moving averages.

Since closing prices are widely followed, they may be manipulated by traders to produce the appearance of a rally. This practice, known as a high close, is especially prevalent with micro-cap stocks that have limited liquidity since less dollar volume is needed to move the price higher. Traders should be wary of using closing prices as a gauge of micro- and small-cap stock successes and look at candlestick charts and other indicators for added insight. Given that closing prices are watched by most serious investors, stock manipulators hope to create a buzz on a particular stock in order to attract investors.

Stock manipulation is the act of artificially inflating or deflating the price of a security, a practice that includes the high close. These manipulations, among others, are a form of illegal trading that results in personal gain. While illegal, regulators often find these manipulations hard to detect. The manipulator generally wants to stick with stocks of smaller companies, as it’s much easier to manipulate their share prices. Penny stocks offer more-frequent targets compared to medium and large cap firms, which are more closely scrutinized by analysts. Stock manipulation is also called price manipulation, market manipulation, or is simply referred to as manipulation.

An example of manipulation would be to place buy and sell orders simultaneously through a variety of brokers. These will cancel each other out but because of the higher volume, appear as if there is more interest in the security then there actually is.  In addition to the high close, other kinds of manipulations include the pump and dump, the most frequently used manipulation, which artificially inflates a micro cap stock and then sells out, leaving later followers to hold the bag. There is also the poop and scoop, the inverse of the pump and dump, which may be less common because it is much more difficult to besmirch the reputation of a solid company with a good reputation than to inflate the reputation of an unknown company.