Hold and Hope, More Like, Hold and Lose
Dear Penny Stock Millionaire,
Today, let’s talk about penny stock hold and hopers…
A few years back, this guy contacted me by email to tell me he’d lost a bunch of money investing in weed stocks. He’d been following the Wolf of Weed Street on Twitter. Then he invested his nest egg, watched it grow fast … and watched it tank even faster.
Realization set in. He and the rest of the ‘Wolf Pack’ were headed down a slippery slope. So he went to Florida for a face-to-face with the Wolf.
Later, as he tried to dig himself out of the mess, he got in touch with me. I told him every stock he was in was a pump and dump. Sell it all.
He wrote about his experience in “Men’s Journal.”
“Everything I owned tanked. Hour after hour I sat in front of my computer, watching as prices ratcheted into the toilet.” — Erik Hedegaard, “Buying High: How to Get Rich on Pot Stocks”
Later the three of us — me, the article author, and the Wolf — went out to dinner. My treat. Read the article to see what happened. Then bookmark it. Come back to it any time you think the penny stock you’re about to buy is the next big thing.
Why? Because while penny stocks can spike big, too many people fall in love with the technology or the idea behind the company. And they go down with the ship.
Ride the Hype — But Don’t Buy BS
The lesson you should pull from that interview? These stocks literally never work out.
You have to learn to ride the hype, to buy the hype, but don’t buy into the company. Don’t hold and hope. Respect the fact that the company is 99.999% likely to fail. It happens over and over again.
Ignorance Is NOT Bliss With Penny Stocks
Newbies aren’t bad people, they just don’t know what they’re doing. Promoters, on the other hand, they kinda are bad people. But whether you’re just dumb and ignorant or manipulative and ignorant, you’re gonna lose. Either way, you’re gonna be wrong.
The “Men’s Journal” article is one of the best examples of how penny stock pumps work.
Stock Trading Twitter Battles
I warned all the pot investors that the stocks were following big pump patterns. They came back with things like…
“Weed is gonna be legal. So much money is gonna come pouring into this industry.”
“After it happens, no one is going to know who Tim Sykes is.”
So I was battling the Wolf of Weed Street on Twitter. He believed in his companies. Yes, he made a lot of money on the way up. And a lot of his followers made a lot of money. On the way up.
But he didn’t get off the ride at the top. He truly believed pot stocks would just keep going up.
I kept trying to tell them that it didn’t matter if pot became legal. It didn’t matter if it became a big business. The pattern was exactly the same and newbies were getting crushed.
The author of the “Men’s Journal” article believed, too. The ‘Wolf Pack’ believed. They were saying things like, “This is a new industry, Tim Sykes is a dinosaur, he doesn’t understand.”
Then when everything crashed exactly like I said it would, the writer saw what was happening.
It’s the Same Pattern Every Time
What does the big weed stock run of 2014 have to do with today? Everything. The same pattern just keeps coming. Let me show you some more recent examples…
Verb Technology Company, Inc. (NASDAQ: VERB)
A good example is VERB. This was being pumped a while ago. And I was fighting every naive sucker and promoter who was involved because the stock was just going up.
It wasn’t a question of if it was gonna fail. And they were trying to show me product demos and new agreements. I was saying “I don’t care — it’s a promoted stock.”
Here’s the VERB chart:
VERB 1-year chart — courtesy of StocksToTrade.com
When you look at the chart, understand VERB never hit the highs you see. It’s a true penny stock. Ticker changes … reverse splits … all to keep the price up. So the chart starts when the ticker changed to VERB. And just before it changed ticker…
Somebody was putting money into the promotion. They weren’t putting money into product development. So you have to wonder, why is somebody spending money to get the stock higher?
Again, it’s the same pattern. And I’m more focused on the pattern.
Here’s another example…
Kraig Biocraft Laboratories (OTCQB: KBLB)
Back in April, KBLB had a good press release, big volume, and a big percent gain. I was buying the first green day — which is a pattern I like. I thought it would spike again on day two. It didn’t. The big breakout was on day eight.
Sometimes the first green day doesn’t work exactly. But again, I was on the right track. The stock quintupled and then crashed. When it crashed, I tried my dip-buying strategy. But it didn’t bounce perfectly.
Take a look at the KBLB one-year chart:
KBLB 1-year chart — courtesy of StocksToTrade.com
Then when KBLB got all the way back up near its highs, I went for the breakout. It failed, but I recognized it wasn’t breaking out and got out for a small profit. A lot of people didn’t. They believed in the company. And they lost.
Here’s an even more recent example…
Green Holding Corporation, Formerly Discovery Gold Corp (OTCPK: DCGD)
This is a stock that came up from under a penny all the way to over $2 a share. That’s a ridiculous percent gain. Whether it’s promoted or not. (They put out a press release saying they just became aware there was a big promotion. Companies always like to play dumb.) And I don’t care whether they knew or not. The fact is, there was a promotion.
So if you look at a lot of my recent tweets, you see I’m fighting with DCGD longs, bagholders, or promoters. I don’t know the difference, and it doesn’t matter. All I know is this follows my pattern.
Its the SAME pattern every time no matter what promoters try to say, don’t believe me just look at history. Can’t fight stats/facts but if you do then learn the hard way
The crazy thing is the bagholders, pumpers, and believers keep trying to tell me how good their company is. And how wise their CEO is. It follows the same pattern. People are just idiots.
I’ve seen this a lot. So yes, I was ripping it even as it was going higher. But just like during the big weed stock run, I was getting blamed when they crashed. I never shorted DCGD. And I never shorted KBLB.
Pump or Not, Always Lock in Gains Along the Way
These are low-priced stocks. You don’t know how far they’re gonna go, and shorting is tough right now. And I don’t mind buying these. But at the same time, when I’m buying I lock in 10%–20% gains along the way. I don’t hold and hope. I trade with rules.
And recently DCGD made another run. My guess is that the pump a few weeks back was because some restricted shares became unrestricted. Often you’ll see pumping going on right before insiders can sell.
Here’s the DCGD one-year chart:
DCGD 1-year chart — courtesy of StocksToTrade.com
Pumping happens to get the stock price up so insiders can sell at inflated prices. Whether that’s what actually happened … that’s what it looks like. So I was ripping on this long before the crash, and then I got blamed for the crash. But I was buying it. Not shorting it.
“Why anyone would take investment advice from a Twitter handle escapes me at the moment.” — Erik Hedegaard, “Buying High: How to Get Rich on Pot Stocks”
Learn to trade rather than follow someone’s Twitter pump. And if you’re gonna learn to trade, be careful choosing your teacher. Do they share all their trades — both wins and losses? Do they know the patterns? Do they have experience?
Experience and Honesty
I like being honest.
So even if a stock is going higher, I’m gonna say pump it higher. But I’m still not gonna believe in the company. And I’m not gonna be surprised when everything comes crashing down. I’ve seen it too many times.
By all means, ride these pumps up on every breakout and big volume push. But never believe the hype.
A follower of mine put it like this. “Once you really believe in them, the promoters have done their job.”
So learn to get off along the way. Learn to take profits. And be careful shorting. I wouldn’t short — you just don’t know how high they can go and short squeezes are wrecking people lately.
Study the Past to Prepare for the Future
I’m a glorified history teacher. I’ve been teaching this pattern for over a decade now. I’ve seen it play out countless times over the past 20 years.
The key is not being ignorant. Study up. Learn from the past because it’s the same pattern every time. What you read about in the “Men’s Journal” article — it’s gonna happen again. Will you be prepared?
Editor, Penny Stock Millionaires