SNPK: Beware

Update: Now that SNPK has had the death drop that I originally warned about in this post, the new question is whether it will recover. You can read my opinion of how you should handle the situation here. I think SNPK is a pretty worthless company although many people still seem inclined to believe the hype behind their vitamin product. Just look at their logo from their 10-Q form filed earlier this year!

Ask yourself if a business that focused on oil and gas exploration just a few months prior would be capable of suddenly producing a successful vitamin product. The two industries are not even remotely related. If your barber suddenly opened up a restaurant and a sign on the front said it was great, would you believe the sign or would you be skeptical?

Further on in that same 10-Q form is the balance sheet ending December 31st of 2011. From this form we can see that the company had generated ZERO revenue for the preceding sixth month period.

"As at December 31, 2011, the Company has a working capital deficit of $204,427 and an accumulated deficit of $244,368."

Original Post: ----

So far, SNPK has followed an extremely similar trend to NSRS, the previous pump by the same group now promoting SNPK. If we can continue to extrapolate this trend, as would be logical, we should see SNPK crash very soon. My guess is that it happens this week, maybe even tomorrow.

My advice to people is simply to take profits if you're long and definitely don't go long if you were thinking about it. Take a moment to consider the risk/reward ratio: In the best case and least likely scenario, you stand to make 50 cents per share. On the other hand, you risk losing 75 cents per share. In the more likely scenario, you might gain 10 cents per share but you are still risking that same 75 cents per share of downside thus making either option a terrible idea. A good trade opportunity should offer at LEAST twice as much reward as there is risk.

I'm sure some of you might be thinking "I would never risk 75 cents per share, that's why I set a stop loss." Such logic is a common misconception regarding the nature of a stop loss. Such orders do not guarantee that you can exit your position at or just below that level. A stop loss only means that your sell order will be SENT at that level. In the event of a panic, hundreds of traders will be desperately sending in sell orders or having their stop losses trigger as well. The consequence of this imbalance in sellers to buyers is a rapid decline in stock price. It is extremely, extremely, extremely, difficult to exit your position in a panic and there is an excellent chance you will only be able to sell once the price hits the very bottom and begins to bounce. Such is the risk of stop losses. You try to protect yourself and only end up getting out at the worst possible price then have to watch in horror as the price recovers slightly. This effect is greatly exacerbated by the fact that SNPK trades on the bulletin boards. There just isn't as much volume there.

That being said, I don't want you to think that SNPK is going to be a great bounce play. It could be. I really can't say. The only thing I can be confident about at this point is that SNPK is going to drop in the near future and I would like to help prevent at least one person not lose all of their money.