The Bait

I buy all Netherweave Cloth that are priced at 7 gold or below, and if supply is low and the price on bags are right - I can stretch up to 10 gold. But my ideal buying price per stack o'cloth is 5 gold. It just feels right to buy something for 5 and sell it for 15. Or 17. Or even 19. And luckally the other bag manufacturers never seem to make any big efforts into controlling the marked (yesterdays post seems to be a misjudgement, I listed my undercut bags and wathced the other bags timeout giving me the chance to reset the marked from below 10 to 18 gold).

Bags sell in medium quantities, so to keep the g/hour at a sufficent rate, I depend on getting cheap cloth. I spend ~10 minutes a day on netherweave cloth/bags (crafting time excluded as this is afk-time anyways), and I want my profit to be at least 200g per day. This means I also need to strangle my competition by buying all reasonable priced cloth and at the same time make sure I can buy most of the cloth for less than 5 gold - which is doable:
There's a very simple trick I like to call 'the Bait'. I don't buy out all cloth cheap cloth, but leave a stack or two - and then undercut it without a buyout price. This way I leave a false impression that some people have put cloth on the AH at ridiculous prices (8-25 gold -always 3 pages of this), while a few have put them out cheap. Smart players who are selling a batch of new cloth will undercut 8g cloth, and not the 4g without buyout bait I just put there. Luckally there are enough less mentally gifted people in WoW to let this work.
To improve the illusion, I can log on to other characters and post smaller stacks of cheap cloth - with buyout - so it won't hurt me too much if competitors buy them.
Now we suddenly have multiple players trying to sell cloth and undercutting eachother!

The downside of this is it won't always work, and you have to keep an eye on the AH so competitors don't snatch cheap cloth before you. You have to rely, to some extent, on lazy competion that don't make their purchases too often.
The upside is alot of underpriced cloth for better margins. Yesterday I put my bait out at 1900 and at 2300 I bought out 25 stacks of Netherweave Cloth at 3.5-3.99 gold. In April I managed to trigger a war on cloth sales (I have no idea where my competitors were) - buying several hundred stacks of cloth at 2-3 gold. Good times!

Edit: To illustrate this is what met me the morning after. 22 stacks of less than 5g Nethweave stacks.