Penny Stocks: Pump and Dump (SELL TO SUCKERS)

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)

Date Open High Low Close Volume Adj Close* Jan 19, 2011 0.28 0.28 0.28 0.28 437,800 0.28 Jan 18, 2011 0.29 0.29 0.28 0.28 435,000 0.28 Jan 17, 2011 0.28 0.29 0.28 0.28 469,400 0.28 Jan 14, 2011 0.29 0.29 0.28 0.29 479,000 0.29 Jan 13, 2011 0.29 0.29 0.28 0.29 993,400 0.29 Jan 12, 2011 0.29 0.29 0.28 0.29 744,000 0.29 Jan 11, 2011 0.29 0.29 0.28 0.29 409,000 0.29 Jan 10, 2011 0.29 0.30 0.28 0.30 833,600 0.30 Jan 7, 2011 0.30 0.30 0.28 0.29 678,300 0.29 Jan 6, 2011 0.28 0.30 0.28 0.30 1,728,800 0.30 Jan 5, 2011 0.27 0.28 0.27 0.28 583,600 0.28 Jan 4, 2011 0.26 0.28 0.26 0.28 487,300 0.28 Jan 3, 2011 0.26 0.26 0.25 0.26 492,100 0.26 Dec 30, 2010 0.26 0.26 0.25 0.26 217,000 0.26 Dec 29, 2010 0.26 0.26 0.25 0.26 93,000 0.26 Dec 28, 2010 0.27 0.27 0.26 0.26 86,000 0.26 Dec 27, 2010 0.25 0.28 0.25 0.27 1,468,000 0.27 Dec 24, 2010 0.25 0.25 0.25 0.25 166,200 0.25 Dec 23, 2010 0.25 0.26 0.25 0.26 203,800 0.26 Dec 22, 2010 0.25 0.26 0.25 0.26 648,700 0.26 Dec 21, 2010 0.25 0.26 0.25 0.25 822,000 0.25 Dec 20, 2010 0.26 0.26 0.25 0.25 598,400 0.25 Dec 17, 2010 0.26 0.26 0.26 0.26 400,600 0.26 Dec 16, 2010 0.26 0.26 0.26 0.26 57,400 0.26 Dec 15, 2010 0.26 0.27 0.26 0.27 169,600 0.27 Dec 14, 2010 0.26 0.26 0.26 0.26 456,400 0.26 Dec 13, 2010 0.26 0.26 0.25 0.26 649,500 0.26 Dec 10, 2010 0.26 0.26 0.25 0.25 732,200 0.25 Dec 9, 2010 0.26 0.26 0.25 0.26 303,900 0.26 Dec 8, 2010 0.26 0.26 0.25 0.26 304,600 0.26 Dec 6, 2010 0.26 0.27 0.25 0.26 625,500 0.26 Dec 3, 2010 0.27 0.27 0.26 0.26 628,600 0.26 Dec 2, 2010 0.27 0.28 0.27 0.27 283,400 0.27 Dec 1, 2010 0.26 0.27 0.26 0.26 93,500 0.26 Nov 30, 2010 0.28 0.28 0.26 0.27 875,200 0.27 Nov 29, 2010 0.28 0.28 0.27 0.28 579,100 0.28 Nov 26, 2010 0.28 0.28 0.28 0.28 378,800 0.28 Nov 25, 2010 0.28 0.28 0.28 0.28 720,800 0.28 Nov 24, 2010 0.28 0.28 0.28 0.28 305,900 0.28 Nov 23, 2010 0.29 0.29 0.27 0.28 928,300 0.28 Nov 22, 2010 0.29 0.29 0.28 0.28 1,057,800 0.28 Nov 19, 2010 0.29 0.29 0.29 0.29 504,200 0.29 Nov 18, 2010 0.29 0.30 0.29 0.29 552,100 0.29 Nov 16, 2010 0.31 0.31 0.30 0.31 811,000 0.31 Nov 15, 2010 0.34 0.34 0.29 0.31 3,137,500 0.31 Nov 12, 2010 0.38 0.40 0.37 0.37 2,716,800 0.37 Nov 11, 2010 0.37 0.38 0.35 0.38 3,223,300 0.38 Nov 10, 2010 0.38 0.38 0.36 0.37 789,500 0.37 Nov 9, 2010 0.40 0.40 0.36 0.38 1,299,100 0.38 Nov 8, 2010 0.39 0.40 0.38 0.38 4,302,600 0.38 Nov 4, 2010 0.32 0.41 0.32 0.38 11,517,500 0.38 Nov 3, 2010 0.31 0.32 0.31 0.32 466,000 0.32 Nov 2, 2010 0.32 0.32 0.31 0.31 419,000 0.31 Nov 1, 2010 0.32 0.33 0.32 0.33 1,067,600 0.33 Oct 29, 2010 0.30 0.32 0.30 0.31 1,036,800 0.31 Oct 28, 2010 0.30 0.31 0.29 0.31 127,000 0.31 Oct 27, 2010 0.29 0.31 0.29 0.31 572,600 0.31 Oct 26, 2010 0.28 0.29 0.28 0.29 309,000 0.29 Oct 25, 2010 0.28 0.28 0.28 0.28 204,300 0.28 Oct 22, 2010 0.28 0.28 0.28 0.28 130,000 0.28 Oct 21, 2010 0.28 0.28 0.27 0.28 156,100 0.28 Oct 20, 2010 0.27 0.28 0.27 0.28 254,000 0.28 Oct 19, 2010 0.28 0.28 0.28 0.28 40,000 0.28 Oct 18, 2010 0.28 0.28 0.28 0.28 12,000 0.28 Oct 15, 2010 0.27 0.28 0.27 0.27 0 0.27 Oct 14, 2010 0.28 0.28 0.28 0.28 70,000 0.28

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)

Date Open High Low Close Volume Adj Close* Oct 13, 2010 0.28 0.28 0.28 0.28 80,600 0.28 Oct 12, 2010 0.28 0.28 0.28 0.28 135,000 0.28 Oct 11, 2010 0.28 0.28 0.28 0.28 120,000 0.28 Oct 8, 2010 0.28 0.28 0.28 0.28 0 0.28 Oct 7, 2010 0.28 0.28 0.28 0.28 20,600 0.28 Oct 6, 2010 0.28 0.28 0.28 0.28 42,000 0.28 Oct 5, 2010 0.28 0.28 0.28 0.28 13,000 0.28 Oct 4, 2010 0.28 0.28 0.27 0.27 220,000 0.27 Oct 1, 2010 0.27 0.28 0.27 0.28 91,900 0.28 Sep 30, 2010 0.27 0.27 0.27 0.27 72,600 0.27 Sep 29, 2010 0.28 0.28 0.27 0.27 28,400 0.27 Sep 28, 2010 0.28 0.28 0.28 0.28 190,000 0.28 Sep 27, 2010 0.28 0.28 0.28 0.28 3,000 0.28 Sep 24, 2010 0.27 0.27 0.27 0.27 1,800 0.27 Sep 23, 2010 0.28 0.28 0.28 0.28 60,000 0.28 Sep 22, 2010 0.28 0.28 0.28 0.28 172,000 0.28 Sep 21, 2010 0.28 0.28 0.28 0.28 5,000 0.28 Sep 20, 2010 0.28 0.28 0.28 0.28 0 0.28 Sep 17, 2010 0.28 0.28 0.28 0.28 6,000 0.28 Sep 15, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Sep 14, 2010 0.28 0.28 0.26 0.26 71,600 0.26 Sep 13, 2010 0.27 0.28 0.27 0.27 0 0.27 Sep 9, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Sep 8, 2010 0.27 0.27 0.27 0.27 10,600 0.27 Sep 7, 2010 0.28 0.28 0.27 0.27 36,000 0.27 Sep 6, 2010 0.27 0.29 0.27 0.27 0 0.27 Sep 3, 2010 0.28 0.28 0.28 0.28 25,600 0.28 Sep 2, 2010 0.27 0.28 0.26 0.28 76,200 0.28 Sep 1, 2010 0.28 0.28 0.28 0.28 0 0.28 Aug 30, 2010 0.28 0.28 0.28 0.28 43,000 0.28 Aug 27, 2010 0.28 0.28 0.28 0.28 20,000 0.28 Aug 26, 2010 0.28 0.28 0.28 0.28 70,000 0.28 Aug 25, 2010 0.28 0.28 0.28 0.28 186,000 0.28 Aug 24, 2010 0.29 0.29 0.28 0.28 40,000 0.28 Aug 23, 2010 0.28 0.28 0.28 0.28 20,600 0.28 Aug 20, 2010 0.28 0.28 0.28 0.28 200,000 0.28 Aug 19, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 18, 2010 0.29 0.29 0.28 0.29 163,700 0.29 Aug 17, 2010 0.28 0.29 0.28 0.29 241,500 0.29 Aug 16, 2010 0.28 0.29 0.28 0.28 341,800 0.28 Aug 13, 2010 0.28 0.29 0.28 0.29 214,000 0.29 Aug 12, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 11, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 10, 2010 0.29 0.29 0.29 0.29 37,500 0.29 Aug 9, 2010 0.31 0.31 0.29 0.29 19,000 0.29 Aug 6, 2010 0.29 0.31 0.29 0.29 0 0.29

Prices (Daily)

Date Open High Low Close Volume Adj Close* Aug 3, 2010 0.30 0.30 0.30 0.30 30,000 0.30 Aug 2, 2010 0.28 0.30 0.28 0.30 18,600 0.30 Jul 30, 2010 0.30 0.30 0.29 0.30 202,000 0.30 Jul 29, 2010 0.31 0.31 0.30 0.30 238,800 0.30 Jul 28, 2010 0.29 0.30 0.29 0.29 53,000 0.29 Jul 27, 2010 0.29 0.29 0.29 0.29 95,000 0.29 Jul 26, 2010 0.29 0.29 0.29 0.29 94,900 0.29 Jul 23, 2010 0.30 0.31 0.29 0.29 306,000 0.29 Jul 22, 2010 0.30 0.31 0.29 0.29 40,500 0.29 Jul 21, 2010 0.29 0.31 0.29 0.30 273,600 0.30 Jul 20, 2010 0.29 0.31 0.29 0.29 185,200 0.29 Jul 19, 2010 0.30 0.30 0.29 0.30 18,000 0.30 Jul 16, 2010 0.29 0.31 0.29 0.29 0 0.29 Jul 15, 2010 0.31 0.31 0.29 0.31 159,600 0.31 Jul 14, 2010 0.29 0.31 0.29 0.31 15,000 0.31 Jul 13, 2010 0.28 0.29 0.28 0.29 1,800 0.29 Jul 12, 2010 0.29 0.29 0.28 0.28 28,900 0.28 Jul 9, 2010 0.29 0.30 0.29 0.30 50,000 0.30 Jul 8, 2010 0.29 0.29 0.29 0.29 25,000 0.29 Jul 7, 2010 0.29 0.30 0.29 0.29 37,000 0.29 Jul 6, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Jul 5, 2010 0.28 0.30 0.28 0.28 0 0.28 Jul 2, 2010 0.29 0.29 0.29 0.29 20,000 0.29 Jul 1, 2010 0.29 0.29 0.29 0.29 10,000 0.29 Jun 30, 2010 0.29 0.29 0.29 0.29 26,000 0.29 Jun 29, 2010 0.29 0.29 0.28 0.28 100,500 0.28 Jun 28, 2010 0.31 0.31 0.29 0.30 75,000 0.30 Jun 25, 2010 0.29 0.31 0.29 0.29 0 0.29 Jun 24, 2010 0.30 0.30 0.30 0.30 10,000 0.30 Jun 23, 2010 0.30 0.32 0.30 0.31 680,700 0.31 Jun 22, 2010 0.29 0.30 0.29 0.29 0 0.29 Jun 21, 2010 0.29 0.30 0.29 0.29 121,200 0.29 Jun 18, 2010 0.29 0.29 0.29 0.29 20,000 0.29 Jun 17, 2010 0.30 0.30 0.30 0.30 1,000 0.30 Jun 16, 2010 0.29 0.29 0.29 0.29 85,000 0.29 Jun 15, 2010 0.28 0.29 0.28 0.29 20,000 0.29 Jun 14, 2010 0.28 0.30 0.28 0.28 0 0.28 Jun 11, 2010 0.28 0.30 0.28 0.28 0 0.28 Jun 10, 2010 0.29 0.29 0.29 0.29 40,000 0.29 Jun 9, 2010 0.29 0.30 0.29 0.30 46,000 0.30 Jun 8, 2010 0.28 0.28 0.28 0.28 22,700 0.28 Jun 7, 2010 0.28 0.28 0.28 0.28 7,000 0.28 Jun 4, 2010 0.28 0.28 0.28 0.28 600 0.28 Jun 3, 2010 0.28 0.31 0.28 0.29 89,800 0.29 Jun 2, 2010 0.28 0.29 0.28 0.28 0 0.28 Jun 1, 2010 0.29 0.29 0.28 0.29 282,600 0.29 May 31, 2010 0.29 0.29 0.29 0.29 12,000 0.29 May 27, 2010 0.28 0.29 0.28 0.29 216,200 0.29 May 26, 2010 0.28 0.28 0.28 0.28 168,000 0.28 May 25, 2010 0.29 0.29 0.27 0.28 378,800 0.28 May 24, 2010 0.29 0.29 0.28 0.29 85,000 0.29 May 21, 2010 0.28 0.29 0.27 0.29 162,500 0.29 May 20, 2010 0.29 0.29 0.28 0.29 121,800 0.29 May 19, 2010 0.30 0.30 0.30 0.30 305,000 0.30 May 18, 2010 0.31 0.31 0.30 0.30 173,000 0.30 May 17, 2010 0.31 0.31 0.31 0.31 44,600 0.31 May 14, 2010 0.31 0.31 0.31 0.31 77,000 0.31 May 13, 2010 0.32 0.34 0.30 0.31 730,100 0.31 May 12, 2010 0.31 0.32 0.31 0.31 866,700 0.31 May 11, 2010 0.33 0.33 0.33 0.33 30,000 0.33 May 10, 2010 0.33 0.33 0.32 0.33 144,700 0.33 May 7, 2010 0.32 0.34 0.32 0.32 253,600 0.32 May 6, 2010 0.34 0.34 0.33 0.34 272,300 0.34 May 5, 2010 0.34 0.34 0.34 0.34 15,000 0.34 May 5, 2010 0.0178 Dividend May 4, 2010 0.36 0.36 0.35 0.36 206,100 0.34 May 3, 2010 0.36 0.36 0.36 0.36 30,000 0.34

Check also:

Penny  Stocks:  Pump and Dump

http://www.investlah.com/forum/index.php/topic,19103.0.html

GSB: "Hidden Gem" or "Pump and Dump Penny Stock"

http://www.investlah.com/forum/index.php/topic,18320.0.html

Buffett Abandons Value Investing. Penny Stocks, Day Trading Are My Real Key To Wealth

Buffett: Penny Stocks, Day Trading Are My Real Key To Wealth

 Posted: April 1, 2011 11:05AM by Stephen Simpson

TUTORIALS: The Greatest Investors

In an interview that is sure to shake the pillars of Wall Street, billionaire investor Warren Buffett revealed to our crack reporter Kent Baleevit that he actually made his wealth from risky penny stocks and day trading. "C'mon, Kent ... long term value investing? Who has time for that crap? I'm an old man ... I need to make my money quick and get to the casino before the lines at the early-bird buffet get too long."

Turning His Back on Value
Although Warren Buffett is one of the investors widely credited with popularizing long-term value investing, in point of fact he has long since abandoned that approach. "Here's the thing, Kent … I just got tired of waiting. Do you know how long it takes to make money from holding undervalued stocks?"

Apparently academic research played a significant role in Buffett's change of heart. Many academics have written papers that demonstrate that there is no system that can reliably beat the market, and that market-beating investors are just a statistical anomaly. This view has perhaps been best expressed in Burton Malkiel's book "A Random Walk Down Wall Street".

"See, Kent? I read these papers and these books and they made a really impressive case that it was just impossible to consistently beat the markets. They had a lot of stats and cool charts and everything. So, I looked at the billions and billions of dollars that I had, and the hundreds of thousands of dollar that they had, and decided that they must know something I didn't. So, I decided to abandon long-term value investing".

When asked if he had any plans to continue investing, the famous Omaha investor was practically ebullient. "Day trading, baby! It's exciting and these sites make it so easy. I mean, I just log on to read the news and there's a "Trade" button everywhere I look. And when I trade, it makes this cool sound … like the machine is happy. And if I trade a thousand times this month? I'll get to be in their Super-Duper Special Trader Club, and that will give me access to these software packages that I could just go out and buy for $100".

Making Dollars Out Of Pennies
Instead of buying giant boring companies and holding for decades, Buffett has thrown his lot in with the penny stocks. After all, those efficient market hypothesizers that proved that it's impossible to beat the market have based their case largely on information - the idea being that all that can be known about a big company is already known, but that it might be possible for lesser-known companies to have some outperformance potential. Not only that - at just pennies a share an investor can own hundreds of thousands of shares at a time.

On top of that, Buffett has discovered that there are some truly amazing opportunities in penny stocks. "Yeah, this one company? They're going to cure cancer. I called the CEO and he told me so himself. I did some research afterwards on Google and I didn't see any articles about it in Science or Nature, but the CEO assured me that those journals are just fronts for the hedge fund industry and his company had to keep all of the really interesting information to themselves or the pharmaco-industrial-media-complex would steal it all."

"Oh, and this other company? They know how to change your car's engine to run on water. And there's one here that can clean up pollution. And then there are these China companies. I don't really know what they do, but they're Chinese, so that has to work right? I mean, I know they don't have any auditors and they're actually headquartered in the Caymans, but I'm sure it's all fine. I mean, it's China!"

Day Trading - The Real Secret to Wealth?
Buffett has also apparently turned to day trading to supplement his income. Apparently, dozens of helpful millionaires log on to message boards every day just to help investors like him make more money. "Yeah, Kent, it's really cool. I read about all this money that people were making, and these systems that could double or triple my money in just a couple of weeks. So, I had to check it out, right?"

"Once I got to doing research online, it really just changed my life. There were all these guys talking about how they doubled their money in just a week and all I had to do was follow their picks and I could do the same. How awesome is that? I mean, I know there are all those newsletters out there that promise to double my money, but they charge money. And hey, I'm Warren-freaking-Buffett. I don't spend money if I don't have to, right? And besides, it's the internet … it must be true, right? I mean, I'm a billionaire and I never give any of my ideas away a minute sooner than I have to, but there's all of these rich people online just waiting to help you!".

On The Markets and Corporate Strategy
Buffett was not just going to talk about his new investment strategies. He also wanted to offer a few thoughts on the markets themselves and corporate policies. "Here's the thing … I know the market is rigged, but that's actually a good thing. I mean, I've never once lost money because I made any kind of mistake - it was just a conspiracy by shorts and journalists to bring down the stocks and hurt innocent investors like me. Once we stop them from exposing the problems these companies have and raising any kind of doubts whatsoever, all of those stocks will go right back up".

Turning to acquisitions, Buffett questioned why all of these companies are so active in mergers and acquisitions. "I don't see why these companies keep buying and selling these units. I mean, they're just enriching the bankers and amusing themselves, right?"

"I know I used to do deals, but I've sworn off of them now". When asked why he would stop such a successful strategy, he answered, "well, it's those academics again. I read some papers that said that deals don't add value and the markets are always efficient … so any sort of deal done at any premium has to be a bad move. Who was I going to believe? My own track record of value-building deals or a paper written by an academic who never had to meet a payroll in his life?"

The Bottom Line
To say the least, Buffett's newfound market wisdom is intriguing. After years of building incredible wealth with a very well-described and consistent strategy, Buffett has decided to believe those who lack the patience or ability to replicate the strategy and assert that it therefore cannot work. Likewise, this famous investor's embrace of modern investment strategies like day trading and penny stocks is sure to force a reevaluation of these neglected sectors.

Happy April Fool's Day from Financial Edge! This article was written for fun, and was not intended to offend or misinform.

http://financialedge.investopedia.com/financial-edge/0411/Buffett-Penny-Stocks-Day-Trading-Are-My-Real-Key-To-Wealth.aspx?partner=wbw0411