Nice try but unconvincing. There is no such things as "fair" market value, "rational" investor behavior or "efficient" markets. Please read Mandelbrot or Taleb on Finance to end the belief in Gaussian law applied to irrational behaviors.
It has been shown that, if we had "rational" markets", events like financial crises would happen every 500 000 years instead of every 10-15 years.
Hence you refutation does not hold.
The refutation doesn't rely on any such thing. That was just a simple way to explain it. If it makes you happy, re-read it but everywhere you see, say, $10, mentally substitute "whatever the average price would have been over the medium-term had the price not been manipulated". Wherever you see, say, $7, substitute "a bit less than what the price would have been had it not been manipulated".
Of course, the argument doesn't work if the price is increasing continuously. But, obviously, anyone can make tons of money in that case.
The point is very simple -- you have to manipulate the price at your own expense, and others can make you take as big a loss as they wish. And you have to split the profit with others. And I know for a fact that there are several well-financed people fully capable of doing both of those things.
