Look Familiar?
Don't I Know You From Somewhere?
If any of the following situations look familiar to you, you may
want to consider our quick fix. For every situation, there is an
appropriate response that can maximize your benefit, and limit
your loss. Take a look at some of these for example.
Holding A Dog
Your stock continues to sink, week by week. You keep thinking
that it can't go any lower, or that it will rebound eventually.
Volume dries up, the price flat-lines... Rumors of reverse
splits materialize. The stock is below minimum listing
requirements for its parent exchange.
Diagnosis: You are probably holding a sinking ship. You may
think it can't go lower, but it can. It can go to zero. Usually
after a reverse-split the price continues to decline. If shares
are bumped from their exchange two things will happen: the price
will take an immediate hit, and trading volumes will dry up so
it will be harder to sell shares. Usually in these situations it
is better to admit you made a mistake and get what capital you
have left out of the investment.
Worm-Tongue
Your associate tells you about a penny stock that is going to
make a serious move. They've got a patented technology that
sounds flashy, although even after he explains it neither of you
really understand what it does or how it works. It is going to
set a new standard in the industry, and the potential market for
their sales is in the billions. His tip comes from an 'inside'
guy at the company. He doesn't know the official title of the
inside guy, and he can't tell you the company's revenues,
employee size, management structure, or how long they've been in
business.
Diagnosis: Your associate may be the victim of a 'promotional'
stock. Be careful! It's catchy. You are about to become the next
victim in the line, and you'll probably infect a few others too.
And when they tell the story of this miraculously undiscovered
penny stock, they'll be saying this news all comes from an
'inside guy' at the company. Almost always these situations turn
out badly. Things are not as they seem. You aren't taking a
gamble on a stock with some potential. You are one of a hundred
targets in a carefully constructed and well-planned promotional
scheme to drive the share price up. These schemes are immoral,
illegal, and... they happen all the time.
Message In A Bottle
You read a detrimental comment in a chat room or message board
about a stock you hold or are thinking of buying. It scares you
and makes you second guess your investment decisions. You see
that other people have responded in agreement to the posted
message.
Diagnosis: Maybe there is some truth to it, maybe none
whatsoever. Check with some official sources to confirm or deny
the comments. Look at the latest press releases if it is a
factual matter. Call the Investor Relations department if it is
a theoretical or rumor-based matter. Consider all message board
and chat room information dishonest until proven honest.
Shooting The Moon
Your stock has been soaring, and your profits are significant,
although you still haven't sold your shares. You like the
company and had intended to invest for the long-term, although
you hadn't expected such strong performance. If the stock has
spiked this high, it's value must be getting recognized, so it
could probably go higher.
Diagnosis: The stock may be ready for a short term pull back.
Profit-taking sales are inevitable, and each time the shares go
a little higher the number of people thinking about taking their
money out increases. After a strong run-up shares usually suffer
some weakness, and if the rise was based on a press release or
rumor that won't significantly impact the company's ability to
meet their goals, shares may be prone to coming all the way back
down to their previous level. You may want to sell half of your
holdings to lock in your gains, and let the rest ride.