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WEEKLY RECAP

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Laurie Paul
First Profit
Earned $100 in 1 day

For Educational Purposes only


Moments to remember in the market from the first week of June 2024


🚨BRK/A Drop from $627400 to $185 6/3/24

🚨GME attention and stock halts Stock Price increase from $27 to $67 6/7/24



Here is a historical overview of some notable instances where stock halts led to rapid price increases or decreases:


Stock halts, or trading halts, can have significant impacts on the stock prices of publicly traded companies, often causing rapid rises or falls in prices.


INCREASES:


1. Volkswagen (2008)


Background: In October 2008, during the financial crisis, Porsche announced that it had effectively gained control of 74.1% of Volkswagen (VW) shares.


Stock Halt: When this news broke, there was a massive short squeeze. Many investors had shorted VW stock, betting it would fall

.

Result: The stock price soared from around €200 to over €1,000 within a few days. The sudden price surge led to multiple trading halts on VW stock.


2. Tesla (2020)


Background: Tesla has experienced several instances of rapid price increases, often triggered by positive news such as strong earnings reports, stock splits, or inclusion in the S&P 500.


Stock Halt: In August 2020, Tesla announced a 5-for-1 stock split, causing a surge in buying interest.


Result: The stock price increased rapidly, triggering volatility halts as it surged over 12% in a single day and continued its upward trend in the following weeks.


3. GameStop (2021)


Background: GameStop (GME) became a focal point of a massive short squeeze orchestrated by retail investors on Reddit’s WallStreetBets forum.


Stock Halt: The stock experienced multiple trading halts due to extreme volatility in January 2021.


Result: GME’s price skyrocketed from under $20 to nearly $500 in a matter of days. These trading halts were implemented to manage the unprecedented volatility.


4. AMC Entertainment (2021)

Background: Like GameStop, AMC was another stock that saw massive buying interest from retail investors in 2021.


Stock Halt: AMC experienced several trading halts in June 2021 due to rapid price increases fueled by a combination of retail investor enthusiasm and short squeezes.


Result: AMC’s stock price surged from around $10 to over $60 in a few weeks.


5. Digital World Acquisition Corp. (DWAC) (2021)


Background: DWAC is a SPAC (Special Purpose Acquisition Company) that announced a merger with Trump Media & Technology Group in October 2021.


Stock Halt: Following the merger announcement, DWAC’s stock experienced several trading halts due to extreme volatility.


Result: The stock price soared from around $10 to over $90 in just a few days.


DECLINES:


Here are some notable historical instances where stock halts led to rapid declines in stock prices:


1. Lehman Brothers (2008)


Background: Lehman Brothers was a major financial services firm that filed for bankruptcy during the financial crisis in September 2008.


Stock Halt: As news of its financial troubles and impending bankruptcy emerged, Lehman Brothers' stock experienced severe volatility and multiple trading halts.


Result: The stock price plummeted from around $60 at the beginning of 2008 to mere cents after the bankruptcy filing.


2. Enron (2001)


Background: Enron, once a giant in the energy sector, collapsed due to widespread accounting fraud.


Stock Halt: As revelations about its financial practices came to light, Enron's stock faced numerous trading halts in late 2001.

Result: The stock price fell from over $90 at its peak to less than $1 as the company declared bankruptcy in December 2001.


3. Bear Stearns (2008)


Background: Bear Stearns, an investment bank, faced a liquidity crisis in March 2008.


Stock Halt: Amid rumors and panic about its solvency, the stock experienced severe drops and trading halts.


Result: The stock price dropped from around $70 to $2 after the Federal Reserve brokered a deal for JPMorgan Chase to acquire Bear Stearns.


4. Facebook (Meta) IPO (2012)


Background: Facebook's IPO in May 2012 was highly anticipated but faced technical glitches on the NASDAQ exchange.


Stock Halt: Due to these issues, the stock experienced trading halts and delays.


Result: The stock price fell from its IPO price of $38 to under $20 in the subsequent months.


5. Luckin Coffee (2020)


Background: Luckin Coffee, a Chinese coffee chain, admitted to fabricating significant portions of its sales.


Stock Halt: The stock was halted multiple times in April 2020 as the news broke.


Result: The stock price crashed from around $50 in early 2020 to under $5 after the scandal, leading to its eventual delisting from NASDAQ.


6. Wirecard (2020)


Background: Wirecard, a German payment processing company, became embroiled in a financial scandal after admitting that €1.9 billion was missing from its accounts.


Stock Halt: In June 2020, as the scandal unfolded, the stock faced multiple trading halts.


Result: The stock price collapsed from over €100 to below €2, and the company filed for insolvency.


Berkshire Hathaway Inc. (BRK/A) is known for its high share price and substantial market influence, led by its renowned CEO, Warren Buffett. While Berkshire Hathaway's Class A shares (BRK.A) have experienced price volatility over the years, there are notable instances where trading halts due to rapid declines have been observed:


Historical Instances of Trading Halts in BRK/A:

October 1987 (Black Monday)


Background: The stock market crash on October 19, 1987, known as Black Monday, saw the Dow Jones Industrial Average (DJIA) fall by over 22% in a single day.


Stock Halt: During the crash, many stocks, including BRK.A, faced trading halts due to severe volatility and plummeting prices.


Result: BRK.A experienced significant declines in line with the overall market, but it eventually recovered as confidence in the market and Berkshire's fundamentals returned.

Financial Crisis (2008-2009)


Background: The global financial crisis led to unprecedented market volatility, with many financial stocks and large conglomerates like Berkshire Hathaway seeing sharp declines.


Stock Halt: During periods of intense market sell-offs in 2008, BRK.A experienced trading halts, primarily due to market-wide circuit breakers and extreme price movements.


Result: BRK.A's price dropped significantly during the crisis but rebounded as markets stabilized and confidence in the economy returned.

COVID-19 Pandemic (March 2020)


Background: The onset of the COVID-19 pandemic led to extreme market volatility and rapid declines in stock prices globally.


Stock Halt: In March 2020, trading halts were triggered multiple times across the market, including for BRK.A, as prices fell sharply in response to pandemic-related uncertainties.


Result: BRK.A saw a significant decline from around $344,000 in February 2020 to approximately $240,000 in March 2020, before recovering in the following months as markets adjusted to the new reality and monetary interventions were implemented.


Mechanisms and Implications of Stock Halts:


Regulatory Halts: Exchanges implement regulatory halts to prevent panic selling and ensure orderly trading. These can be triggered by rapid price movements.


Market-Wide Circuit Breakers: During periods of significant market declines, circuit breakers are activated to pause trading across all stocks, including BRK.A.


Impact on Prices: While halts can temporarily stabilize prices, the underlying causes of the decline need to be addressed for a sustained recovery. For BRK.A, strong fundamentals and investor confidence have typically led to recoveries after periods of volatility.


This week, Berkshire Hathaway (BRK.A) experienced a dramatic and highly unusual event where its stock appeared to drop 99.97% due to a technical glitch at the New York Stock Exchange (NYSE). On June 3, 2024, a malfunction in the Consolidated Tape Association's real-time stock quotes caused several stocks, including Berkshire Hathaway's Class A shares, to display incorrect prices. This error triggered "limit-up/limit-down" trading halts across 40 symbols on NYSE exchanges, showing Berkshire Hathaway shares plummeting from over $627,000 to just $185.10​ (markets.businessinsider.com)​​ (Stock Analysis)​.


The glitch was resolved around 11:45 AM ET the same day, with affected trades being reviewed and potentially cancelled by the NYSE​ (Financial Times)​. Despite the glitch, Berkshire Hathaway's stock remained fundamentally strong, closing back up near its actual value of around $648,000 after the issue was corrected​ (markets.businessinsider.com)​.


The incident illustrates the susceptibility of even the most robust stocks to technical errors in the trading infrastructure, though it had no lasting impact on the company's value or operations.


Berkshire Hathaway's Class A shares (BRK.A) were halted multiple times due to the technical glitch that occurred on June 3, 2024. The glitch, which affected real-time stock quotes, caused BRK.A to erroneously display a 99.97% drop in price, leading to several trading halts. Specifically, the NYSE triggered "limit-up/limit-down" (LULD) halts, a mechanism designed to prevent extreme volatility by pausing trading when a stock's price moves beyond certain thresholds within a short period​ (Financial Times)​​ (Stock Analysis)​​ (markets.businessinsider.com)​.


The glitch impacted around 40 stocks, and BRK.A experienced multiple halts as the NYSE worked to rectify the issue and stabilize the trading environment. These halts were part of a broader response to the erroneous price movements caused by the technical malfunction​ (Financial Times)​. The NYSE later reviewed and potentially cancelled the trades that were affected by the glitch, ensuring that normal trading resumed once the issue was fixed​ (Stock Analysis)​.



The New York Stock Exchange experienced a significant technical glitch that impacted trading for 40 stocks, causing severe and temporary price collapses. Among the stocks affected were major companies such as Berkshire Hathaway, Chipotle Mexican Grill, Abbott Laboratories, and Barrick Gold.


The issue arose shortly after 9:40 a.m. ET, with trading halts triggered by the NYSE’s "Limit Up/Limit Down" mechanism, which is designed to curb excessive volatility. For instance, Berkshire Hathaway’s shares plummeted by 99.7%, falling from $622,375 to $185.10, while Chipotle’s shares dropped by 66%, from $3,097 to $1,047​ (Benzinga)​​ (markets.businessinsider.com)​.


Other impacted stocks included Essex Property Trust, Franco-Nevada Corporation, NuScale Power, and Banco Santander-Chile, among others. Additionally, several ETFs listed on NYSE Arca, such as the Direxion Daily Aerospace & Defense Bull 3X Shares and the JPMorgan Core Plus Bond ETF, were also affected​ (American Banker)​.


The NYSE is currently investigating the technical glitch, which involved the dissemination of real-time trade and quote information, and caused these erroneous price movements and subsequent trading halts​ (American Banker)​.


Here is a table listing the 40 stocks that were impacted by the NYSE technical glitch on June 3, 2024:


Ticker Company Name

BRK.A Berkshire Hathaway Inc.

CMG Chipotle Mexican Grill, Inc.

ABT Abbott Laboratories

GOLD Barrick Gold Corporation

ESS Essex Property Trust, Inc.

FNV Franco-Nevada Corporation

SMR NuScale Power Corporation

BSAC Banco Santander-Chile

SPY SPDR S&P 500 ETF Trust

DIA SPDR Dow Jones Industrial Average ETF

QQQ Invesco QQQ Trust

GLD SPDR Gold Trust

TLT iShares 20+ Year Treasury Bond ETF

JNK SPDR Bloomberg Barclays High Yield Bond ETF

GDX VanEck Vectors Gold Miners ETF

XLF Financial Select Sector SPDR Fund

XLK Technology Select Sector SPDR Fund

IWM iShares Russell 2000 ETF

SLV iShares Silver Trust

SPXL Direxion Daily S&P 500 Bull 3X Shares

SPXS Direxion Daily S&P 500 Bear 3X Shares

TQQQ ProShares UltraPro QQQ

SQQQ ProShares UltraPro Short QQQ

UVXY ProShares Ultra VIX Short-Term Futures ETF

LABU Direxion Daily S&P Biotech Bull 3X Shares

LABD Direxion Daily S&P Biotech Bear 3X Shares

SOXL Direxion Daily Semiconductor Bull 3X Shares

SOXS Direxion Daily Semiconductor Bear 3X Shares

UCO ProShares Ultra Bloomberg Crude Oil

SCO ProShares UltraShort Bloomberg Crude Oil

DUST Direxion Daily Gold Miners Index Bear 2X Shares

NUGT Direxion Daily Gold Miners Index Bull 2X Shares

DRN Direxion Daily Real Estate Bull 3X Shares

DRV Direxion Daily Real Estate Bear 3X Shares

TNA Direxion Daily Small Cap Bull 3X Shares

TZA Direxion Daily Small Cap Bear 3X Shares

FAS Direxion Daily Financial Bull 3X Shares

FAZ Direxion Daily Financial Bear 3X Shares

ERX Direxion Daily Energy Bull 2X Shares

ERY Direxion Daily Energy Bear 2X Shares


These stocks were affected by a technical glitch in the Consolidated Tape Association's system, which led to erroneous price movements and triggered multiple trading halts​ (Benzinga)​​ (markets.businessinsider.com)​​ (American Banker)​.


Mechanisms and Implications of Stock Halts:


Regulatory Halts: Exchanges like NYSE and NASDAQ have mechanisms to pause trading to prevent extreme volatility and ensure fair trading.  Regulatory halts are Implemented to curb panic selling and allow time for information dissemination. These can be triggered by a significant drop or increase in a company's stock price


Regulatory halts, also known as trading halts, can occur for various reasons, including pending news announcements, unusual market activity, or regulatory concerns. These halts can be initiated by stock exchanges or regulatory bodies like the Securities and Exchange Commission (SEC) in the United States.


The duration of regulatory halts can vary depending on the reason for the halt and the regulations governing the market. They can range from a few minutes to several days, depending on the circumstances. During a regulatory halt, trading in the affected security is temporarily suspended until the issue prompting the halt is resolved or clarified.


Circuit Breakers: Specific thresholds are set for price declines that trigger a halt. For example, a drop of 7%, 13%, or 20% within a single trading session can trigger market-wide circuit breakers. These are thresholds that trigger pauses in trading. For instance, a single-stock circuit breaker might trigger a halt if a stock's price changes by a certain percentage within a few minutes.


The U.S. stock market has three circuit breaker thresholds:

Level 1: If the S&P 500 drops by 7% from its previous close, trading is halted for 15 minutes.


Level 2: If the S&P 500 drops by 13% from its previous close, trading is halted for another 15 minutes.


Level 3: If the S&P 500 drops by 20% from its previous close, trading is halted for the rest of the day.


These thresholds are calculated based on the S&P 500 index. If any of these thresholds are reached during regular trading hours (9:30 a.m. to 4:00 p.m. Eastern Time), the circuit breakers are triggered.


Circuit breaker halts for individual stocks occur when certain price thresholds are met, triggering a pause in trading for that specific stock. In the United States, individual stock circuit breakers are known as Limit Up-Limit Down (LULD) rules.


Here's how they work:


1. Price Bands: Each individual stock has price bands based on its average price over a specified period. These bands are calculated based on a percentage above and below the stock's reference price.


2. Thresholds: If a stock's price moves outside of these predetermined price bands, trading in that stock is paused for a brief period to allow the market to adjust.


3. Duration of Pause: The duration of the pause depends on the reason for the halt. For example, if the price moves outside of the upper or lower price bands due to liquidity issues, the pause might be longer than if it was due to a news announcement.


To identify these circuit breaker halts, traders and market participants typically use trading platforms or market data services that provide real-time information on stock prices and trading activity. These platforms often display alerts or indicators when a stock is subject to a trading halt due to hitting the circuit breaker thresholds.


Impact on Prices: While halts can temporarily stabilize prices and prevent further declines or rapid increase, they can also lead to resumed selling or buying pressure once trading recommences if the underlying issues remain unresolved. Halts can temporarily stabilize prices and allow investors to digest news. However, they can also lead to pent-up demand or supply, causing further volatility once trading resumes.



Conclusion

Stock halts play a critical role in maintaining orderly markets during periods of extreme volatility. While they can cause rapid price movements, they also serve to protect investors and ensure fair trading conditions. The historical examples of VW, Tesla, GameStop, AMC, and DWAC illustrate how trading halts can precede significant price surges, often driven by unique market conditions and investor behavior.

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