Penny stocks are those that trade at < RM 1.00.
Some investors confuse these low prices for value.
These stocks are often and easily promoted or manipulated.
Beware of the promoters or manipulators who hype these stocks in the internet forums.
They have often taken a position well before.
The unwary "investors" enter and soon find themselves buying these stocks higher than they can sell.
Here is an example of a stock that was from a forum.
Study the chart of the stock and the table of its prices and volumes.
I believe this chart depicts this penny stocks when it was being "Pumped and Dumped" by its promoters or manipulators. (Period of interest: September 2010 to December 2010)
There are good lessons one can draw from this event.
Check the observations made below.
LCTH : Daily Prices and Volumes
| Prices (Daily) |
|---|
|
Observations:
After a long period of promotion, many investors were made aware of the stock in the internet forum.
Subconsciously, the stock entered their attention and was in their radar screen.
Many hesitated and did not enter in the early stages of the promotion due to doubts and cautiousness.
Then, when the volume started to climb and the prices started to move upwards, these previously primed "investors" took notice.
The more adventurous entered first and early at this stage.
As the price rose, more entered. This was the confirmation that many of these "primed investors" were waiting and looking for. "It must be true, the game is now on, I am getting in too."
But note, they were buying at higher prices. Some even bought more at higher prices (averaging up). Did you notice that they were already paying a higher price than the "usual"?
Then more of the "dumb money" flowed in. Look at the huge volume of stocks transacted on 4.11.2010. This counter was the talk of the market now. Ever wondered WHO SOLD on that day? Of course, the manipulators and the smart money.
The party was as good as over by now. However, more SUCKERS came in over the next few trading days. With ALL SUCKERS in the stock now, and the smart money having moved out, there were no more SUCKERS to support the price.
ALL the SUCKERS now holding the stocks were hoping to sell to ANOTHER SUCKER who was willing to buy from them at higher prices.
Alas, NO new SUCKERS appeared. This led to the precipitous fall in the price from the 6th trading day after the peak of the volumes and the price of the stock.
It was then a matter of awakening for those left holding the stock at high prices. Over the subsequent weeks and months, they too realised they were SUCKED, holding or departing from the shares with their losses.
| Prices (Daily) |
|---|
|
| Prices (Daily) |
|---|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Check also:
Penny Stocks: Pump and Dump
GSB: "Hidden Gem" or "Pump and Dump Penny Stock"
