Simple Logic for Trading Herbalife (HLF)

The current situation regarding Herbalife is getting a lot of media attention so I thought I'd throw some cold logic into the mix.

The premise is that Herbalife, a multi-billion dollar multilevel marketing nutritional distributor, stands accused of operating a pyramid scheme. It seems that the main proponent of this accusation is Bill Ackman, a successful hedge fund manager of Pershing Square Capital Management LP which essentially placed a billion dollar bet that Herbalife was fraudulent and thus worthless.

While these accusations aren't new, Senator Edward J. Markey has recently asked regulators to investigate the issue. There have also been reports that Canada's top regulator has begun looking into the issue.

A quick scan of the twitter buzz on $HLF will make it clear that there are innumerable ways to spin and convolute the issue at hand. To me though, things are pretty cut and dry.

Does it really make sense to buy a stock that is under immediate threat of being found fraudulent?

It doesn't really matter what's true and what's being exaggerated for the short term. At this point, the risk of a major drop greatly outweighs the potential gain of treating this as a bounce play.

Farewell Awesome Penny Stocks

It is a day of mixed emotion for penny stock traders all over the world. A major player in the penny stock promotion game has announced it's retirement after recently attracting an unusual amount of attention from the Securities and Exchange Commission.

While APS was no doubt a venomous amalgam of ill-intentioned evil-doers, I can't help but miss them. If nothing else, they were fun to hate and crusade against. For now we can only celebrate the defeat of a parasitic giant while we wait patiently for the void they left to be refilled by the promotional scumbags they left behind. I imagine we won't have to wait long. I for one, am going to put on some tea. Any takers?

4 Huge Reasons Bitcoin is Worthless

Bitcoin, the first digital cryptocurrency introduced in early 2009 by the by pseudonymous developer Satoshi Nakamoto, was designed to circumvent institutional influence by offering a more direct person to person exchange of currency. It is, in more ways than it's supporters would like to admit, analogous to cash. Additionally, and the reason why I was interested in writing about it, is that it seems to possess a similar anatomy to that of a penny stock pump and dump.

At the time of this writing, a single bitcoin is worth around $121 USD. Back in April it was valued around $260. Some people have even been so ridiculous as to speculate that it will be worth $100,000. That's certainly impressive but also brings to light the unsettling issue of volatility considering it's worth plummeted by more than half in about a month's time.

Don't fix it if it ain't broke

It's a mantra we hear a lot, and for good reason. It's a waste of time and resources to replace things that are still working without serious issues. Cash already provides us with a deregulated method of trade. If you don't trust institutions, no one is forcing you to keep your money in a bank. The fact is, more often than not, institutions aid us in the safekeeping of our money and governments work to ensure they do it properly.

While the European dept crisis certainly demonstrates the disturbing possibility of what can happen when those plans go south, it's not difficult to point out why bitcoin doesn't offer much in the way of a solution.

Bitcoin is overly technical and nonintuitive

Even the most basic explanations of how Bitcoin is structured and expanded will make the heads of the average reader begin to spin. There is in fact a reason why things like gold and silver have high values; they're tangible, easy to understand, and pleasurable to look upon. Bitcoin, by contrast, is none of those things, barring the way to wide adoption. And of course wide adoption is absolutely necessary for a currency to work because if people don't accept it, they consider it worthless.

This problem is compounded by the currency's dependance on a network. While traditional currencies can be minted and printed to facilitate quick and painless trading, Bitcoin only offers the bulky series of numbers and letters called an address which look like this: 16yXE5cEbKTRbm4U8LFydp1Q9egWHcpcQ9

Bitcoin still relies on institutions

If Bitcoin hopes to survive in the world of traditional currency, it needs some way to be converted between them so as to establish its relative worth. For this it must rely on several loosely regulated groups such as Mt. Gox and Dwolla with essentially no safeguards as to their stability or longevity.

Bitcoin owners are also vulnerable to the same vulnerabilities as people who decide to keep all of their money under a mattress. Computer failures, fires and theft can all result in the loss of your digital wallet and thus your money. While there are workarounds for these problems, a similar level of effort and care can be used to protect your traditional forms of currency which again begs the question, "why switch?"

An internet based currency is plagued by internet users

You don't need a degree in social psychology to notice that anonymity brings out the worst in us. Reading a handful of YouTube comments will prove that point to anyone. In this regard, Bitcoin at an even bigger disadvantage than traditional currencies.

Honest Bitcoin users must traverse a minefield of scams and thieves while using their money in any transaction. Without the sort of regulation that traditional currencies are subject to, Bitcoin users have little recourse to fall back on when they're cheated. Take, for example, an interaction in which two people agree to trade a laptop for a number of bitcoins. Person A sends 5 bitcoins to Person B who then decides not to send that laptop after all. Person A has no one to seek justice from as their government likely doesn't acknowledge Bitcoin as a true currency, thus making it legally unclear if a theft actually occurred at all.

Furthermore, Bitcoins are no longer the sole digital currency which exposes another problem with unregulated currencies. Anyone can make one. The new cyptocurrencies, known as altcoins in the Bitcoin community, serve to make the value of the original more arbitrary and diluted. There are also many rumors that some of these altcoins are controlled by organized crime networks, which makes sense given the lack of concrete legislation overlooking these digital creations.

Personally, I'd rather work on improving the currencies we already have before I start investing in a new one that seems to have a dismal future and no clear hope of overcoming the problems we currently face.

Why XUII Dumped & What's Next

Today XUMANII (XUII) crashed following the release of a lawsuit put forth by George Sharpe. Mr. Sharp alleged that the promoters were in violation of anti-spam laws.

According to the article on yahoo:

Named as defendants in the case are: Degroupa Tenner Morales Media Corp. and Centro Azteca S.A., the current and former publishers of the Awesome Penny Stocks series of newsletters; and, Victory Mark Corp Ltd., the publisher of newsletters Select Penny Stocks, Preferred Penny Stocks and Penny Stock Heroes.

The problem is, I don't think any of the promoters actually are in violation of the anti-spam laws. Their subscribers voluntarily sign up for the alerts, and all of the emails come with links that allow you to unsubscribe. Consequently, I don't expect the lawsuit to stick or the pump to be over yet. As I write this, it is already on its way to at least partial recovery. While I'm not confident enough to buy this myself, I think it's more likely than not that it will return to the .40s tomorrow. That being said, if you're unfamiliar with the nature of pump and dumps, and you're reading this because you are completely confused by what has happened today, I advise you to close your position. This stock already has too many red flags even before you start looking at fundamentals.

4 Reasons I Don't Trust XUII as the New APS Pick

1. Awesome Penny Stocks usually releases their picks on Tuesdays or Thursdays, not Mondays.
2. While XUII traded millions of shares in premarket and many traders considered this confirmation of the alert, the pick wasn't confirmed by email until around 10:30am. Lot's of speculation creates sketchy unpredictable price action.
3. XUII started getting pumped by Victory Mark Corp. on May 1st which has made it more crowded and less relatable to previous APS pumps
4. $ACCS which was speculated to be the new pick before the open did have a classic pre-pump chart. While I'm just guessing here, it made me wonder if they intended this as the pick, then switched to XUII to kill frontrunners. That would also explain the alert being delayed until around 10:30am.

I was hoping that APS would recall their pick but that seems less likely now that they have placed an XUII banner on the website. Regardless, I won't trade this like I would other APS picks. It's just too different which I consider to be risky.

Watchlist: LOTE, WSGP, POLR

Lot78, Inc. (LOTE)

The size and strength of this pump is so anomalous that it's rather scary to trade. It wouldn't surprise me to see this thing to hit $20 but it also wouldn't be very shocking to me if it crashed all the way to $6 tomorrow. While that sort of volatility is exciting and worth watching for, I haven't traded it. I much prefer lower risk plays. I'll continue to look for shares to short but even if a bunch become available, I'll keep my position size low just in case this thing isn't done being ridiculous yet.


Western Graphite Inc. (WSGP)

A Tobin Smith pump and dump with a disclosed budget of $1,813,286. I first received an email about this on the 22nd of April which also linked to the pump's landing page. I imagine that the landing page went up on the 19th from looking at the volume in the chart. Considering that this pump is getting a bit old, I wouldn't want to hold a sizable long position for very long. The price action hasn't been very bearish yet so I'm not ready to start shorting. It might be an option to buy some dips and sell the bounces but I'm hoping for some strong upward spiking in the next few days that I can feel confident to short in to.


Polar Petroleum Corp. (POLR)

Sort of similar to WSGP in pump style, this one has a disclosed budget of $700,000 on the landing page. It doesn't seem to be getting quite as much attention as other pumps in the market so I highly doubt it will have the momentum to breakout past it's previous highs around $4.25. Everyday that it continues up, I am looking to short it more aggressively.

GOFF: Fool's Gold For APS Subscribers

Earlier this morning AwesomePennyStocks (APS) released GOFF as their latest pick. APS describes Goff Corp. as a mining exploration company with interests in the Aguadas, Department of Caldas, Colombia area. The goal of this promotion seems to be to convince naive investors of the great potential in gold, diamond and silver discovery within this area.

The reality of course is that Goff Corp. is a terrible company that doesn't deserve to be trading at anything more than a penny per share. And that's being generous.

Goff Corp. wasn't always a mining company. It was originally incorporated on July 12, 2010 and aimed to "provide web-based networking and job-placement services for employers and individuals seeking employment in the UK and Ireland" (Form 8-K). The company failed to meet this goal due to inadequate funding.

Goff Corp. has only been a mining company for a grand total of 11 days including today. The recent change in company focus coincides with a change in management as well. The shell had previously been run by Gary O'Flynn and Patrick Corkery, both of whom resigned on February 26th of this year. The sole director of the company is now Warwick Calasse who bought his controlling position in the company (108,750,000 shares) for a mere 25 grand. That amounts to just 0.0003 dollars per share and provides a good indication of what the previous directors considered the worth of the company to be. Previous financial reports confirm this by showing zero income and substantial expenses resulting in a net loss of $29,000 this past year alone.

 If you tend to be an overly trusting person who falls victim to the fluffy bullshit of promotional emails, write down this quote from the companies own 8-K filing and stick it to your monitor:

Since we are an exploration stage company, there is no assurance that a commercially viable mineral reserve exists on any of our current or future properties. To date, we do not know if an economically viable mineral reserve exists on our property and there is no assurance that we will discover one. Even if we do eventually discover a mineral reserve on our property, there can be no assurance that we will be able to develop our property into a producing mine and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

The task of discovering said minerals seems further complicated by the fact that the company doesn't have any employees.

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WUHN: One day wonder

Wuhan General Group Inc. (WUHN), was pumped last night and early this morning by Penny Stock St★r (Tribeca Investments Ltd.) and Marquee Penny Stocks (MHC Inc.). Both entities claimed not to have received compensation for the promotion. In conjunction with this pump, Equities Awareness Group LLC, another pumper, released a press release which could be seen on yahoo finance. The PR featured WUHN along with several other promoted stocks that also had big moves today (MKRS, PIEX, GMEC).

Since neither promoter was compensated with shares, there wasn't as much selling pressure and the price actually held up reasonably well throughout the day. Unfortunately for the followers of the newsletter, the stock gapped up around 350% making the potential for further upside rather dismal. In fact, the high of the day was hit just 35 minutes after the open and showed few signs strength for the remainder of the day.

Despite the fact that the average trader wasn't given a very good opportunity to make money on this stock, the promoters can still call it a job well done. Now they get to brag about their 1,034% intraday profit (which they have in after-hour emails) as well as post a little badge on their website saying they alerted the ticker before such a big move. As you might have gathered, the purpose of these uncompensated pumps is less geared towards making money and more towards building a following of gullible traders. The lazy trader who didn't do their research might read those celebratory emails and decide to invest lots of money into the next pump by Tribeca and/or MHC, with dreams of their money being increased 10-fold. Such reasoning is dangerously flawed and will more likely than not result in a large loss.

For one, future picks by these pumpers will likely be compensated which significantly alters the price action of the pick due to promoter/insider selling. As such, the performance of an uncompensated pump cannot and should not be used as a predictor of performance for compensated picks even from the same promoter. Furthermore, and as we saw today, the intraday percentage gains of these pumps are highly misleading. In reality, the stock only uptrended for a small fraction of the day making it difficult to sell for a profit.

Even if you're familiar with the risks of pump and dumps, these sorts of promos can be dangerous to short sellers. The huge gap up was attractive to shorts and shares to borrow seemed to dry up close to the open around the 0.25 level. Those who shorted that low had to sit through a terrifying squeeze up to 0.45 and are still underwater at this point. Since uncompensated pumps can run so wildly and may not be subject to a catastrophic dump in the near future, there is a whole lot more to lose than to gain with these sorts of plays.

To summarize, read the disclaimer at the bottom of the pump emails/alert pages and be aware of the dangers that uncompensated pumps pose, both for longs and shorts.

Best Damn Penny Stocks: ZPPB

Best Damn Penny Stocks (BDPS) released Zippy Bags Inc (ZPPB) as their new promotional pick this morning. On the alert page, BDPS reported being compensated $500,000 for the promotion. I received my first email at 9:39am although I heard that others received emails as early as 9:32am.

This time difference is of critical importance if you hope to trade these sorts of moves considering the price had quadrupled within five minutes of the open (before I even received my first alert). Unfortunately, buying after the first few minutes of trading is exponentially more risky with less potential for profit.

That being said, there is still the opportunity to make money later in the day so long as you can tolerate greater levels of risk and can afford to lose your investment should things go sour.

I personally fall under that category of high risk tolerance so I bought 20,000 shares at $0.27 just for 3pm. Unfortunately, I can't say that it was a great trade but I can explain my thoughts to give you an idea of how one can trade these pump and dumps.

Before making such a trade, you need a decent background in pump and dumps, especially BDPS pumps since each promoter's picks behave differently. Previous pumps also offer a better idea of how current picks will perform so it's useful to look back at old charts (in other words, this post will be helpful in the future).

Honestly, I didn't find as many intraday charts from previous BDPS pumps as I perhaps should have before entering into my trade. Instead I was relying on my memory that BDPS pumps rarely dump on the first day of the pump. Another somewhat sloppy mistake that I made was entering my buy order while the stock was hovering in the 0.28-0.29 range during the hour before I was executed. I knew there was support at 0.27, which is why I set my buy there, but it would have been much less risky to simply wait for that level before sending my buy order. As you can see from the chart, the price actually broke through the 0.27 level and even touched 0.25 for one tick which gave me a nice little heart attack. Had the stock continued to fall, I probably would have lost most of my investment.

In order to avoid such panic attacks, you can set price alerts using your brokers software which will audibly alert you to a specific price level. That way you can decide whether the bid support looks firm enough to buy or if it looks like there may be more dipping before a bounce. Watching Level II will greatly aid you in this decision. The caveat though is that many other traders will be doing this as well, making it difficult to get an execution once the price begins to bounce. That though is the quintessential obstacle in trading pumps; it's difficult to buy at the lows when there is strength and it's difficult to sell when the stock is falling and you're watching your money disappear in front of your eyes.

Lucky for me, the stock didn't collapse at that moment and I went on to make a profit. I knew from the previous BDPS pump BFLX that I wrote about here, the price tends to uptrend in the final hour and close strong. From looking at daily charts of previous pumps, I had decided that it would be too risky to hold my position over night since these pumps don't last for very long compared to Awesome Penny Stocks (APS). I set my sell at $0.30 since price action seemed to consider it a key level throughout the day. I initially thought it would even break .30 for a very strong close considering the rise in volume during power hour so I thought I didn't think I was being greedy. Unfortunately the highest tick was 0.2999 and I didn't get executed. A good lesson there is to take safe profits when you have them especially when building a smaller account.

Contrary to my predictions though, the stock actually dipped during the final minutes of trading and I had to exit at an average of 0.286. I also failed to close my entire position and remain long 2.5k overnight. Based on previous pump performance and the tiny position size, I plan to sell my remaining shares tomorrow at the open. After that I may look for shares to short in anticipation of the dump.

Update: Closed the last of my position for a small additional profit. As I expected, BDPS does not provide good setups for gap-up plays. If that's your thing, consider the next APS pump keeping in mind that for each additional day into the pump, the risk of the dump becomes greater and may even occur on the first day if the pick is recalled, the stock is halted, or the company releases a PR stating they have no involvement in the pump and don't know why the price is jumping so much.

What is a pump and dump?

According to investor.gov,

"Pump and dump" schemes have two parts. In the first, promoters try to boost the price of a stock, typically in a microcap company, with false or misleading statements about the company. Once the stock price has been pumped up, the promoters seek to profit by selling their own holdings of the stock, dumping shares into the market, which typically causes the stock price to collapse.

While this is true, this definition is incomplete. For one, the purpose of the promotion is not solely to raise the stock price. Often the people paying for the promotion are insiders or investors who were compensated by the company with shares at a fraction the current market value. Because of this, their interest is merely to create volume to sell into since selling at any price would provide them with a handsome profit.

The important thing to understand though is that the people being paid to promote the stock are biased by the compensation. Their motivation is to paint the picture of a healthy company worth buying into. Thus, their claims can be exaggerated, misleading, or just plain lies. If you are ever advised to invest in a company, closely inspect the communication for some sort of disclaimer that may indicate the person has been compensated. Often times, this disclaimer appears at the bottom of emails.

Since the purpose of the promotion is to sell shares, there will be a constant downward pressure on the stock price. In the beginning of the promotion though there are usually enough enthusiastic buyers to counteract this selling to cause the price to rise. Once this hype and excitement wares off, the stock price usually falls dramatically. Often, such promotions occur on bulletin board exchanges where there is less liquidity. As a result, it is difficult to sell out of these stocks once they begin to show signs of weakness making them a dangerous investment even if you are aware that it is a pump and dump.

The safest way to play pump and dumps is to buy at the very beginning of the pump if you know the promoter has a solid track record of raising stock prices. The time you hold that stock should relate to your level of risk tolerance. Selling quickly for smaller gains is the least risky strategy and is a good way to build a small account. Holding the stock longer may allow for larger gains but it also presents the risk of large losses due to the difficulty of exiting just before and during a crash. Such a strategy should only be performed by more experienced traders who understand the risks at hand.

A sample promotion email:

GWBU closed green on Friday with a gain of 3.50%. This week could be very significant after one week of being relatively flat.We believe GWBU could be ready to break $2.00 in the very short-term and potentially reach $10.00 or more as predicted by a recent Seekingalpha Analyst.If the Analyst's prediction is achieved, members could be looking at over 800% in gains.Let's look at the TOP 10 Reasons why everyone should consider GWBU before it is too late!#1- According to the company, GWBU focused on developing technologies that reduce fuel consumption by as much as 15% and cut emission by over 70%. This is a technology in huge demand around the world.#2- Just in the States alone there is over 250 million vehicles that could use this technology to reduce fuel consumption and emission. Globally we are talking over 800 million vehicles that could potentially use GWBU's technology.#3-Currently, the global clean-tech market is estimated at $284 Billion and is projected to grow to more than $1.3 Trillion by 2017. Start Technologies Europe I.G.’s technology (GWBU) increases energy efficiency, reduces pollution and is applicable on a global scale.#4- ELASIS Research Centre( part of FIAT Group, 6th largest automaker in the world) worked with GWBU in the past.
Results showed emission reduction by over 40% and fuel consumption by over 10% on a 2003 FIAT Scudo. (see the full report here: http://www.starttechnologiescorp.com/technology/research-reports/)#5- GWBU recently announced contracts that could be worth over $50 million USD. Could there be more contracts on the way?#6- A recent positive test with the Transport Ministry of Barbados showed that GWBU's technology increase fuel efficiency by 20% and significantly cut emission. More evidence that the company's technology is working!#7-  Recent Analyst stated that "majors like Ford, Chevy, and Dodge could be interested in GWBU's technology!" This interest could significantly increase the value of the company in the future.#8- After a week of consolidation, we think GWBU is ready to make a move North. We've seen this in the past, and we believe history will repeat itself very soon!#9- The Reg sho on GWBU shows over 10 million shares in short volume just in the last few weeks. A major short squeeze could propel GWBU much higher!#10- If GWBU can replicate our last pick's percentage gains it would soar to
around $10 in the coming weeks!At these levels, we think GWBU could be a steal and we urge our members to start looking into the company.Sincerely,The Free Investment Report Team

And the associated disclaimer:

(Note the $100,000 expected payment in the final paragraph)

GWBU: Why you shouldn't buy

The following research will hope to reveal why you should think twice before buying into this company. This post will mainly be geared towards those of you who are inexperienced traders as the main goal of this blog is really to protect people from huge losses. I'll be going into as much depth as possible though so I expect this to be of value to experienced traders who already understand the pump-and-dump nature of this stock.

To begin, according to the yahoo business summary, Great Wall Builders Ltd. (GWBU) is...

...a development stage company, focuses to provide homes in the United States and China. It plans to design and sell homes with solar integrated systems, such as solar integrated roof tiles, solar hot water heaters, and solar electric photovoltaic systems. The company intends to market its products through commissioned employees and independent real estate brokers. Great Wall Builders Ltd. was founded in 2007 and is based in Houston, Texas.

It based on the price as of this writing, it has a market cap of 575M which is actually a bit low for past APS pumps (may be one reason to expect the price to increase in the future). The company has zero revenue, zero cash on hand, and according to the latest 10-Q: "As at December 31, 2011, the Company has a working capital deficit of $63,283 and an accumulated deficit of $126,783."

The company has very recently seen a change in management which could be seen as suspicious. The previous CEO had been Peter Evan Bell. According to the financial times:

Mr. Daniele Brazzi has been appointed as President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Director of Great Wall Builders Ltd., effective March 23, 2012. Mr. Brazzi has studied general electronics, electrical engineering and applied electronics. He has collaborated with prestigious brands such as Sony, Kenwood, Clarion and Alpine in the automotive area, developing new technologies. He graduated in medicine for the construction of medical electrical, specific for bio-resonance to treat pathogens, and iris scanners, to detect early disease of human body. Mr. Brazzi has also worked in the orthopedics are for the Rizzoli Institute, Bologna, on ambulatory equipment. Over the past 10 years, Mr. Brazzi has worked in the specific area of the combustion engine, specifically in reducing emissions in the combustion engine. His most recent experience has let him to develop the START device, which boasts more than 800 worldwide installations.

Mr. Jay Almeida has been appointed as Treasurer, Secretary, Director - Operations, Director of Great Wall Builders Ltd., effective March 23, 2012. Graduated from the University of Chicago with a degree in economics. In addition, he graduated as an engineer from Universidad Santa Ursula, Rio de Janeiro, Brazil. Mr. Almeida has a masters degree in Marketing from Universidad de chile, Santiago, Chile. Mr. Almeida also has a Phd. in Engineering Economics from Bonn University, Germany. In 1999, he was nominated as Ambassador of Commerce of Florida for all Latin America and Caribbean countries. After a career as a bank industry for 14 years, Mr. Almeida moved to the US in 1989. Since 1990, Mr. Almeida has served as the President and CEO of PHN Group. PHN Group is an international business group of 5 companies involved with foreign trade (importation, exportation, business representations, international business consulting, trade finance and security technology) in all Latin America, Caribbean and European countries.

According to a marketwire report, the company also took on Mr. Dominico Chiovitti, as a Board Member:

From 1967 to 1992, Mr. Chiovitti was a Senior Chemist and supervisor of the Petro Canada Laboratory in Montreal, Canada. During his career, Mr. Chiovetti controlled and researched several new products, specifically Vanadium Pentoxyde derived from fly ash. Mr. Chiovetti was responsible in the design and development of a method to control CO & CO2 levels for industrial gas discharges into the environment, while collaborating with the Center of Emissions Control. Mr. Chiovitti is a member of the Order of Chemists since 1979 and graduated from the University of Montreal with a Bachelor of Science in Chemistry in 1967.

Although none of these new individuals seem to be involved in any significant issues, the most damning piece of evidence is that Mr. Brazzi also currently serves as the director of research and development at Dpollution International Inc (RMGX.PK). This company has also been previously involved in several stock promotions which include Wall Street Grand, a Lebed pick, a stock egg alert, and several StockMarketLife promotions.

To give you an idea of the success of this company and promotional strategy, RMGX once traded at 80 dollars a share and now is only worth 4 cents a share.

On March 19, 2012 GWBU actually entered into an Asset Acquisition Agreement with RMGX in exchange for 27,306,793 shares of restricted common stock. According to this same SEC filing, "Following the completion of the Agreement and the SPA, Daniele Brazzi control approximately 50.3% of the issued and outstanding shares of the Company." Thus he has a lot to gain from such a promotion if he plans to sell those shares into the promotion.

Another interesting tidbit that seems sketchy and was pulled from an SEC filing is that Peter Evan Bell, one of the previous CEO's quit his position 14 days after taking it on before being reappointed a while later: "On August 3, 2011, Peter Evan Bell was appointed as President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and a member of the Board of Directors. On August 17, 2011, Mr. Bell resigned from all positions with the Company."

As with any pump-and-dump the moral of the story is that the stock will eventually crash, usually within a month. Based on recent past APS picks, these stocks don't make it much past 2 dollars before tanking although this pick began its official promotion at a significantly higher price. Therefore, it is uncertain as whether 2 dollars can be used as an accurate historical measure of the top. Either way though, being long in this stock will become increasingly risky for each passing day.

Another significant factor with this pick is that there are actually shares available to short which has not been the case for the APS picks of the recent past. This means that there will be an awesome profit potential for shorts at some point in the future but I would not suggest shorting this early. It is possible and I think likely that the promoters will manipulate the stock higher in an attempt to squeeze these shorts would could allow the price to reach higher levels than we have recently seen.

If you are still skeptical about the level of sketchiness with this company and the associated promotion, I suggest you check out my post on the most recent APS pick, SNPK to get a sense of how right I was in predictions of what would happen over the next few months while it was being promoted.

GWBU & ENRG?: AwesomePennyStocks Pick

Today AwesomePennyStocks (APS) again impressed me with their sneaky promotion tactics. It seems as though their official release was today with GWBU although ENRG was also released by pennystocks123, what is (or maybe used to be) an APS sister site. Either way though, ENRG isn't trading with any sort of strength so I would avoid it regardless, unless it can prove with volume and price action that it is going to make a move.

The problem with GWBU though is that you can't treat this as day 1 of the pump, as it has been trading with elevated volume for the past few days. Thus, if you have also just discovered it today, I would trade it as you would previous pumps after the first week. The sort of strategy I encourage here is a conservative one, thus I decided not to go long on the stock immediately. Instead, I will sit on the sidelines to see how this confusing situation plays out and wait for any major (20%+) dips to take advantage of.

RARS: What the hell is going on?

For better or worse, I was traveling this past week and wasn't able experience all the drama of the Rarus Technologies Inc. (RARS) play this past week. Since getting back though, my research on the stock and it's promotion has turned up some strange results.

I'm sure many of you are frustrated and confused by what has happened since the stock became the next big play on Wednesday afternoon.

The reason that this stock has been trading so unexpectedly is because everyone was expecting the stock to be the new Awesome Penny Stocks (APS) play. If you are unfamilar with APS, this pumper has recently pumped SNPK, NSRS, AWSR (briefly), and AMWI. It is still presently unclear whether RARS is actually an APS pick, thus the lack of strength in the stock.

Before I even move on to explain what is going on in more depth, there is an important lesson to be learned from this. You can never assume that any single play is riskless and deserving of a dangerously high percentage of your account. The people who pay for these pumps make money from other people losing their money, which should serve as a constant reminder to never trust them in keeping a stock up. If the thought "This can't drop too much, its the very beginning of an APS pump!" ever crossed your mind, then you're thinking about this the wrong way. Pump and dumps can provide some great opportunities to make money, but they are also inherently full of risk due to the nature of a pump and dump. If nothing else, RARS should serve as a valuable lesson for risk management in the unpredictable world of pennystocking.

A quick overview of that happened on Wednesday, is that RARS was released by preferred penny stocks, hero penny stocks, and select penny stocks in afternoon trading. In the recent past, these big picks have been released in a rolling release through all APS/CP sister sites over the course of a few hours. In this particular case though, only these few sites released RARS as the pick, while another group of related APS sister sites re-released SNPK as their pick.

As for the more thorough analysis, nothing is completely clear at this point, so I can't promise that my research is free of error. What seems to be the case though, is that RARS should more appropriately be called a Victory Mark pump rather than an APS pick. That being said, Victory Mark seems to be related to APS since they pumped SNPK and NSRS, the last clear APS/CrazyPenny picks. It is possible though that Victory Mark is now a completely unrelated pumper since they pumped these past two stocks differently (different emails bodies, different time frame) than the APS group.

After that first day though, everyone was expecting the APS/CP sites themselves to release the pick overnight. When that failed to occur, the stock gapped down and has since continued to fall. Even now it is unclear whether RARS is going to be released by APS so I would not suggest buying it here. In a situation like this, when things are unclear, it is best to stay away from it altogether. Staying profitable is all about keeping your odds high, and when you gamble in the hopes of making big profits, you may as well throw away your money in a casino.

SNPK: What Happened And What Next?

Update: I'm declaring SNPK a worthless buy once again. It would make a good short but there have never been shares available to short this whole pump and I see no reason to expect them to become available. Looking forward to the next pump.

Original Post: -----

If you're reading this post, chances are you lost money and are searching for some reason as to why your investment went bad. First off, I'm sorry for your loss. Hopefully I can help prevent such a loss from happening in the future.

What Happened?

To understand this, we need some background. SNPK was being promoted by a group of promoters that are paid to artificially inflate the stock price up. If you found SNPK through some sort of advertisement or email, these are the people who are inflating the price. The promoters job is to generate hype around the stock, sending out thousands of emails a day, telling people how great the stock is. Presumably you were one of those people who was fooled into believing the emails and their $9 price target.

Promoters can also use other tools of varying legality in order to make their featured stock gain in price. Often times it seems as though certain market makers will have a hand in the promotion by putting in huge bids to support the price at unnatural levels. When people see that support, they buy and the price moves up. The artificial support moves up and the cycle then continues until the price is way higher than it deserves to be.

Why would people promote a stock just to crash it later? It's usually unclear who actually paid the promoters and frankly it doesn't really matter. You can usually check the bottom of all emails for a disclaimer to discover an idea of who paid and how much they paid. Here is an example disclaimer from the latest SNPK email:

Check out that last paragraph. This particular promoter group was paid $50,000 dollars to send you an email reassuring you that SNPK will recover. Wouldn't you say that makes them rather biased? Also if the stock crashed 50+% while they were saying how great it is, you probably shouldn't trust anything they say anymore.

Also, the promoters are composed of a vast number of sister sites/organizations so that they can split up the amount of money they have been compensated, thus making them look less biased. I don't remember the exact amount that APS/CrazyPenny was compensated for pumping SNPK but is somewhere around 1 million dollars.

If you are still wondering why people would be evil enough to inflate a stock and then drop it so that normal people like yourself end up losing lots of money, the motivation is the same as many other evil acts: money. Imagine you have a large sum of money and you want to make lots more money with no regard for morality or your fellow human beings. So you buy a million dollars worth of SNPK at 0.28, then spend another million dollars on the promotion. You then sell your million dollars worth of shares at 2.30 just before the drop to make a profit of around 7 million. This is the sort of strategy that fuels the immoral promotional campaigns.

What Now?

Unfortunately, if you've just discovered your loss and are wondering if you should sell and take your losses or wait in the hope that it will rebound as the emails promise (the same emails that originally tricked you), I am going to have to suggest that you sell. Based on previous promotions, there is some possibility of a bounce, but even then it probably won't be by much. The greater chance is that the price will drop even more and over the next month or two, SNPK will be trending down to below 28 cents per share.

I Want My Money Back

Hopefully I can offer some guidance for how to profit from these kind of crashes rather than falling victim to their dishonesty. The key to this is shorting. If you're reading this, you probably don't understand shorting and/or have heard terrible things about it. The truth is, that shorting is just like regular trading but with the opposite goal. Thus, when a stock crashes hard, you make money. Due to the large amount of misinformation about short selling, I invite you to do several google searches about it before coming to a conclusion. Some people even say that it is illegal but that is false. If you'd like to start identifying sketchy stocks and make money from them, I suggest you check out all that profit.ly and friends has to offer.

Coping with the current loss

Big losses are devastating to your confidence both in and outside of the stock market. You don't want to make the same mistake again and next time you want to know how to make money from these sorts of events rather than losing. Hopefully I can help you with these goals.

The important thing to do is to take a break from trading. You will naturally want to regain your losses and it is likely that you will end up making trades with poor risk/reward ratios while trying to do so. By doing this, you will only make things worse and end up losing even more money. Come back to trading when you've calmed down and had a chance to relax. If you trade with the mindset of "I need to make this money," then you're probably going to trade poorly.

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.

What You Need To Know: SNPK

SNPK (SUNPEAKS VENTURES INC), is the latest CrazyPenny/PennyPic promotion, as of this past Thursday, March 8th. The first emails were from the PennyPic websites around 2:38pm, which is somewhat unusually late in the day, allowing for an effortlessly strong close as subscribers piled on. The next day saw a nice gap up as expected and it held its gains. Likely if you're reading this, you missed the bus in the beginning and you're trying to decide whether to jump on now. I caution you greatly as buying this pumps any later than within the first few minutes can result in huge losses.

 

As can be seen in the accompanying chart, the previous pump, North Springs Resources (NSRS) by these promoters eventually dumps hard and all those who were late to the game got burned badly. That being said, the same chart also shows the fairly reliable occurrence of big bounces following all of the major drops. As a result, my suggestion to those thinking about playing this stock, to only consider buying the major drops as they offer the best risk reward. I'm not talking about the slight dips intraday, I'm only talking about the big panics when the Time and Sales (T&S) and Level II (L2) are completely red because everyone is trying to get out as peoples stop losses get triggered all at once. Wait for considerable to support to develop following these panics as often times the stock will bounce very slightly for a minute or two before continuing to plummet.


In terms of fundamentals, the company has a market value of $250,197,946 as of March 9th with 420,500,750 shares outstanding and a float of 145,500,750 as of February 22nd. Fundamentals for this company aren't worth much since it's obvious this company is worthless. This can be summarized by the fact they currently purport to be a drug company but intended to be a mining/natural gas company (they are still classified as a metal mining company). A quote from their February 8-K: "Since inception we have had minimal operations and as such we were considered a 'shell company' as that term is defined under Rule 405 of the Securities and Exchange Act of 1934. It was our initial intention to be a as an independent crude oil and natural gas exploration company; however, due to the lack of revenues and adequate financing, we abandoned our business plan and began seeking out potential acquisitions, joint ventures and/or strategic relationships."