Monday, September 18, 2006
Penny Stocks and SPAM
Lately, I have been recieving a ton of spam about regarding the next penny stock that is going to take off and become the next Exxon Mobil or Microsoft. While I highly doubt it, it did get me curious if a trading plan could be devised regarding the trading of penny stocks advertised via spam. My plan is to set up a fictious portfolio, where I purchase $1000 worth of the "spam" at the closing price price for the day and then sell it when I believe the top has been reached. Stay tuned over the next several weeks, as I report on my findings.
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4 comments:
Hey
I have an investing/trading site named www.wikiwealth.blogspot.com. I am interested in microcap stocks. Where does the research begin? Can you use sites like yahoo finance to research companies at the microcap stage? Thanks for the help.
Hello:
Let me make a few comments regarding this because it's an extremely interesting proposition. The fact is that isn't successful investing all about buying a stock and hoping someone else is willing to pay a higher price than you are. If that wasn't the case, then we would never have a winner.
Many times spam creates action but does it really create a higher stock price? The answer is on a very short term basis. The reason is that most spammers are paid in stock; they are not paid in cash. Therefore, most will sell at the first hint of movement. Their selling creates a supply in the market which in most cases, could not be overcome by the buying created by the spam. In addition, someone hired the spamologists for one reason. That reason is usually to create buying so they can sell. Follow this closely because this is the key. Most spamologists are not Harvard Business School grads. Therefore, they're not smart enough to let the stock rise.( a rising stock price will create more buyers because everyone wants to buy a stock that's going up). In the end, most spam doesn't work. If you want to play the stock spams, I would strongly suggest to play them with a 10% risk. You have to think really short term. Also and this is probably even more important, you have to buy the stock immediately when you see the first spam come across your desk on that given stock. That coupled with a strategy of a 10% risk should allow you to keep your bankroll longer than some of the tables in Vegas. The negative is that you're drinking your own liquor. Think about it.
Km
Small Cap Stocks Blog
I once ran a backtest from filtering out my e-mail. I used both spam, as well as "Investopedia" pseudo-spam. I don't recall ever clicking a 'you can email me' checkbox, and it turns out that they are really rotten stock pickers. Not surprising...
It's the same old pump and dump Ponzi Scheme when you spam a stock's value etc... you are pumping then of course you are selling when everyone is buying!
Regards,
Hanz
http://refibayarea.com
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