RE:RE:Anyways chilly.... That was the third time I called in aboutLIES LIES LIES
Here is how the Pump and Dump scheme works:
• These marketeers are Stock Promoters who buy large amounts of a particular unnoticed, thinly traded nano or micro cap stock at bottom prices. Such buying is done a little at a time over a period of weeks, but usually months, so as not to make the share prices trend up too high. They also do this to give the stock the appearance of gaining investor interest.
These stock are often times pretty good, but not always.
• Then the stock promoters do their job of promoting the thinly traded penny stock or illegal or non-existent stock at the now pumped up prices to investors causing the share prices to jump 10% to as much as 50%, maybe more.
• The naive investors see all the positive hyped up marketing news about the particular stock, and they see the recent trade activity and increasing price and volume of shares. This makes many investors feel excited about the stock.
In this type of penny stock scam, the naive trader will be programmed by the marketeer stock promoter into feeling the stock will go up as much as 300% or more based on the promises of such optimistic news especially after seeing all the trading activity going on with the stock.
• Such traders then buy shares of the stock hoping to rake in the profits.
• The huge buying activity of the thinly traded stock by traders causes the shares of the stock to skyrocket in price above the already inflated prices. The share prices skyrocket because not enough sellers are available to meet present buy orders at current prices. The price of shares rocket to over 15% to more than 100% over a short period of time.
• Such huge new buying activity creates liquidity for marketeers to now sell shares at the inflated prices. The liquidity is created by the high trading volume (trade activity), increased buying activity and increased market cap.
The law of supply and demand is alive and well in that many buyers are available to buy up shares that marketeers are now dumping/selling to hopefully make a huge profit.
NOTE: Liquidity means that enough buyers are available to handle all those who now desire to sell shares of that stock at similar prices. Number of public shares and shareholders is also important for liquidity to handle larger buy and sell orders.
• The marketeer stock promoters, along with a small number of observant/knowledgeable traders, begin selling shares of that stock over that same period of time traders continue to buy the same stock causing small ripples and dips in the continued ascent of share prices.
• The ascent in stock prices begins to slow and waver. The stock promoters will say that this is a breather and any dip in prices is an excellent opportunity to jump in and buy shares or to add more shares to one's portfolio.
• At some point the marketeers may dump the remaining shares of stock they owned which temporarily or permanently causes the share prices to plummet as low, or near as low, as the levels the stock once traded before the marketeers purchased them.
• Marketeers may re-promote the stock a number of times in similar pump and dump schemes for the same stock over a period of months and years creating cycles of highs and lows in share prices and trading volume.
In this penny stock scam, whether prices of shares plummet, and how far they plummet, or whether they eventually trade higher again depends on a number of factors, some of which are the following. . .
Factor 1: A non-existent or fraudulent company, or just a dud that was falsely promoted, will soon be found to be the sham that it is and will eventually be dumped wholesale.
Factor 2: A good company that was unnoticed just needed some good promoting to gain investor interest. Such a stock is likely to continue actively trading with buyers and sellers but generally not as high as hyped up media announcements created.