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Beware of Cheap Stock Promotions and eMail Stock RecommendationsThe internet is full of investment advisory programs claiming to have the secret to spot cheap stocks that are about to explode. Virtually all of these programs are scams.These are called "pump and dump" schemes by the Securities and Exchange Commission. Here is how they work. A group of investors buys several hundred thousand shares of stock in a worthless company or a new start up company with no profits. They might get the stock for 10 cents a share. Now they put it in newsletters, online services and spam potential investors hyping it like crazy with overblown claims it is about to explode. People start buying --pushing up the price of the stock. It might go suddenly to 30-cents a share. But the shares they are buying are being sold by the original investors who are promoting the stock. Basically they are unloading their worthless stock onto you. Once all their stock is sold, they stop promoting and the price starts to fall. Those who bought in at 15, 20, 25 or 30 cents now try to sell to take their profits. The problem is there are no buyers and the price crashes. I watched one of these stocks (pkcy.ob) fall from 30-cents to five cents within a few days. One year later the stock is sitting at 7-cents a share. But there is one way way to make money from these stocks. If you have an account with an online broker that allows you to short these stocks you can make a ton of money doing this. When you see one of these stocks being promoted, watch it carefully for a few days. If it goes nowhere just stay away from it. But if the price increases by more than 50%, watch it closely until the volume starts to dry up. As the volume falls, the price will start falling dramatically. This is the point where you shold short the stock. You can double your investment within a few days with this technique.
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