A Tale Of Penny Stock Insanity
If youve been following our Pump And Dump Friday Alerts, you know all about North Springs Resources (NSRS). This gold exploration company has been hyped up since early December of last year. Of course, they dont have any revenue or profit, and are millions of dollars in debt.
But somehow, in that short timeframe, shares of NSRS soared from just $0.10 to over $1.60! That is, until shares recently collapsed down to $0.17. Ill get back to NSRS share price later
Interestingly, the pumping scheme going on has turned NSRS into one of the more actively searched penny stocks on Google. And in the process, its ensnared many average investors hard-earned cash.
You see, Ive been doing my best to write up compelling articles exposing the truth about NSRS. But its difficult to counter the massive, multi-headed hydra that is the pump and dump hype machine. And while its a thankless job, I hope to save everyone from making a huge financial mistake.
This is where my story comes in, which I dont think youll believe. In fact, I still cant believe it either. Here it goes
Two weeks ago, I was driving back to my office after running an errand, when I received a call. And seeing it was a relative, I decided to take the call (on my built-in, hands-free Bluetooth of course).
It was my nephew calling, and he was actually looking for advice on a penny stock. That was a new one, as Ive never discussed specific penny stocks with him before.
My nephew starts off, Im calling you up to see if you know anything about this stock my buddy told me about.
I asked, Whats the ticker symbol?
Its NSRS.
I honestly couldnt believe it. This tiny penny stock, which would normally be on no ones radar, was now the company in question, by my own nephew.
Im going to interrupt the story for a second here
It just goes to show you how powerful these penny stock promoters are. Theyve reached a member of my family, who I know is an intelligent and well-educated business professional. As a regional software sales manager, he makes a six-figure income. He has a great wife and family and by no means would you qualify him as desperate to strike it rich.
Back to my story.
In my excitement to share my wealth of knowledge on NSRS (as Ive been researching and exposing them for months now), I spouted off as much compelling information as I could in as little time as I had.
They have $16 in cash as of their last financial statement, they have no revenue, and they borrowed $1million at 10% to finance their latest mining project On and on I went. I felt like a beacon of white light, cutting through the fog of the pump and dump machine. I was sure my nephew would be amazed at my depth of knowledge about NSRS.
Then it struck me…
Did my nephew actually own shares of NSRS? I went completely silent.
Interesting, is all he replied.
After continuing to bash NSRS up and down for 10 minutes, I sheepishly asked, Did you buy some of these shares, or are you asking for a buddy?, as to give him an opportunity to save face.
He replied, My friend owns thousands of NSRS shares, and I just bought a couple hundred dollars worth. He continued on, Dont you think theyll rebound, since theyve sold off so much?
My mind was racing fast as I was putting the pieces of the puzzle together real-time. He bought shares because one of his buddies recommended them. He didnt do any research and relied on the pumpers emails he was probably forwarded. He figures hed make a fortune if they kept running like they had.
Early on, I said Id get to NSRS share price. And heres where it comes into my story.
When the pump and dump first started, shares had risen steadily for weeks. And as they always do in a pump and dump scheme, they went hyperbolic short-term. They shot up from $0.60 to $1.60 in just a weeks time.
If youre not thinking it by now, Id be surprised.
Well how much did your nephew pay for his shares? right?
The absolute truth remains a mystery.
After enough harassment, and from what I could get him to admit, he paid roughly $1.00 a share.
Now, his phone call came to me after NSRS shares plummeted two days in a row, down from $1.62 to nearly $0.50. The day we were on the phone, shares were already down near $0.45 so time was running out here.
I chose my next words wisely and spoke them as plainly as possible
NSRS is a pump and dump scheme. If it rebounds at all, sell your shares and take a $0.50 loss per share if possible. I continued on, If anything, you have a few days to a week to see a rebound. NSRS is in the midst of making a classic pump and dump formation, so you will get a small rebound. And when it happens sell all you have, and tell your buddy to do the same. Trust me on this one, I see this all the time!
Interesting, is all I hear back.
When I said you wouldnt believe my story, this is the part you really wont believe
This time, my nephews response was a bit more involved. Well, I think Im going to hang on to the shares. You never know what could happen. And besides, its only a couple hundred bucks were talking about. So whats the point of selling for such a big loss now?
Correct me if Im out of line here but considering I research and write about penny stock pump and dumps all the time, youd think I might have a bit more pull than the average Joe down the street, right?
If you owned shares of NSRS and had the chance to talk to a guy whose job it was to research every move NSRS makes wouldnt you even consider his opinion?
It was like my nephew was in a trance. Im not making this up in the least
The power and allure of riches penny stocks impart on the average Joe is unbelievable. A market professional looks at this stock and wouldnt think twice to walk on by. Never mind if they heard the level of research I have on NSRS… theyd never touch it.
Its clear now, I was witnessing two classic investment mistakes play out before my very eyes.
Number one, falling in love with a stock.
Investors can exhibit pointless hope in the face of confirmed negative news about a stock. You hear about it all the time. They fall in love with a companys business or concept. And even in the face of horrid financials, scandals, and news they wont sell their shares. Theyre thinking, It will come back. Just like my nephew in this case.
Number two, becoming too proud to admit a mistake and sell for a loss.
Apparently this one happens at any cost. Investors will routinely fail to take a loss and admit defeat. They have the strange notion that every trade has to be profitable. They somehow think, Pro traders dont take losses. But nothing could be further from the truth.
This kind of thinking is the fastest way to turn a losing trade into a losing investment.
And sometimes, like with NSRS, which is trading at just $0.17 right now you can lose it all (well, 90% qualifies as all in my book).
It happened to my nephew, who refused to sell his shares.
Now remember, my nephew is a well-educated business professional. He puts multi-million dollar deals together. And he couldnt even hear a word I said. On top of which, he experienced both of these classic mistakes in real-time.
Its like putting a pill in front of someone and saying, Now this pill will kill you slowly over the next 10 days. The response you get is Ok. and they eat it anyway.
The human condition never ceases to amaze me.
I covered a lot of material in this article, so let me recap
- Avoid hyped up penny stock pump and dumps like the plague.
- Dont fall in love with stocks. There are thousands of great companies to buy.
- Learn how to take a loss and move on. You can profit with a new trade.
- Dont ignore the advice of your uncle who just happens to be a penny stock pump and dump expert!
And above all else never fall victim to penny stock insanity!
Editors Note: Instead of pump and dump schemes, my colleague Gordon Lewis researches real, high-performance penny stocks. And hes put together a penny stock portfolio thats turning in winner after winner! To learn more, check out his astonishing service, Penny Stock All-Stars.
Until next time,
Brian Walker
Category: Penny Stocks, Pump & Dump Alerts, Pump & Dump Daily
