Trading Penny Stocks: Useful Information & Techniques by Guapo - Page 15

Hey ModernDayProfit!

Thanks. Good to hear from you again. I've seen your posts occasionally. I've been around, doing a bit of lurking.

Lurking? Ha, when I see or read that word, I always imagine some strange guy hiding behind a tree poking his head out from behind the tree once in a while.

Hey, that grey market stock you mentioned, I think I know which one that is. The next Google? Well, what the heck, let's buy the crap out of it!!

Have a good one!

Guapo

Mea,

Thanks. I'm glad you found the articles useful. Good luck in your trading.

Guapo

Hi Ahhnold,

Thanks. I’m glad you liked the articles.

To answer your first question below, “How and where did they get the money to buy houses to rent?” They were married. Both worked, they were young, no kids, so they could save a higher percentage of cash than a family with three kids, where only the husband worked, for example.

I didn’t mean to give the impression they were buying 20 houses a year or anything like it. It was a slow process for them, and a lot of work. They picked up one or two houses a year over a time span of 20 years or so.

They started in the early 70~s. I haven’t kept current in the real estate market but back then you could occasionally buy houses by simply assuming people’s loans. This was especially true in areas where there were large military communities. A military family would occupy a house for 2-3 years and when assigned to move to a new location, they just wanted to get rid of the house in many cases. With only 2-3 years in a house, they didn’t have much equity so they would let it go if you just took over the payments.

The other thing they did, which I imagine you can still do today, is look for houses that have been foreclosed. You can often, or before you could, pick those up pretty cheap. They would use the house as collateral for the loan on the property they were buying. Then they used the rent they charged every month to make the monthly payments on the loan.

To answer your second question, re your plan to reach your final goal, first, pennies are very different from blue chips. They are a total different animal actually. IMO, trying to accumulate cash playing pennies to put into real estate later may work. It depends on how much time you can devote to them and how good you are at it.

BTW, I’m not a licensed financial adviser or planner so re financial planning for the future, I recommend you seek out a professional in that field and consult him.

I'll repeat my philosophy about penny stocks here. My experience is that one should not count-on investing in them if your goal is attaining wealth and financial stability down the road, for retirement for example.

Generally speaking, investing in penny stocks and holding for long-term growth is unwise, simply because so few of them ever become successful. With penny stocks, unlike blue chips, it’s not a matter of buying one, forgetting about it and checking on it every once in a while. If you buy a penny and check it three months later for example, you’re likely to find it doesn’t exist anymore, underwent a reverse split or some other stock maneuver where your investment is now down 50% or more.

Even worse, penny stocks are extremely volatile. They can move up and down very rapidly. You can turn your back on them for only a day or two and find you have lost a goodly percentage of your money. It’s not unusual at all for a penny stock to fluctuate 20-50% or more in one trading day.

You’ll find to “play” or speculate in the pennies requires a lot of time. You have to watch your stocks when the market is open. If you are working full-time, it’s often difficult to do so at the office.

Having said that, is it still possible to get rich quick in penny stocks? Yes, of course. Do a lot of folks do it? No, but that’s the primary reason you find a lot of folks in the pennies. They’re looking for a large fast payout, the pot of gold at the end of the rainbow.

A second reason you will find people playing penny stocks is that they don’t have much money to spend in the market. They can’t buy a lot of shares of blue chips so they gravitate to the pennies. You can buy and sell penny stocks without a large amount of cash but you’re almost never gonna get independently rich spending $500 or $1000 on a single stock.

Even in the pennies, if you try for the single big score, you have to risk substantial cash to do so; and you’re more likely to lose a major portion of your money rather than becoming a millionaire overnight.

That’s been my observations and experiences in the pennies. So again, I recommend anyone building for future financial stability skip penny stocks and concentrate on accumulating future wealth the tried and true way, slowly but steadily over time. We know that works if done wisely.

BTW, if you do consult a professional financial planner, I can practically guarantee he will advise you to stay away from penny stocks.

I hope I’ve answered all your questions. Good luck in your trading.

Guapo

Darkzero901

You're welcome. I'm glad you like this thread.

Wow! Now that's a first. Some folks have told me they have found the thread useful but nobody has ever told me they loved me before. I don't know what to say except "Thank you!"

Good luck in your trading.

Guapo

Hi StockJock-e,



Ah, the universe's equilibrium has been restored. All is right again with the world!

Hope you are doing well and have been trading profitably!

Guapo

Darkzero901,

Ah, so you're familiar with chaos theory!

Well, I'm very flattered that you like the Guapo thread so much. I really hope it proves useful to you.

105 pages??? Wow, I didn't know it was that long.

Thanks again!

Guapo

Can We Short Penny Stocks Within The U.S.? Part 1

Part 1 Of 2 Parts



This question has been discussed in several threads on HSM over the past year or so. Some people have said you can without giving any particulars. Some folks have said you can’t under any circumstances. A few individuals have posted, hinting they’re shorting such-and-such penny stock. They’ve failed to give details how they’re doing it though.

Some HSM~ers have said they were told by Ameritrade they could short penny stocks but $2.50 was needed for each shorted share. Others have stated Ameritrade told them they could not short any stocks under $5.

Then just recently, Sowned69 posted a link on HSM to the Interactive Brokers’ web site on the subject.

(BTW, Thanks to Sowned69. It was his post that led to this article.)

I checked four brokers, Ameritrade, Choicetrade, Etrade and Interactive Brokers. The information in this article was taken from their web sites. I also had several email exchanges with Interactive Brokers. I looked for information from several other brokers but didn’t find anything on their sites.

Etrade and Choicetrade do not allow shorting of any stocks under $5 a share. Ameritrade and Interactive Brokers do but with severe restrictions for most of us.

Let’s discuss Interactive Brokers first. From their web site (in italics below):

http://www.interactivebrokers.com/en...?ib_entity=llc


Short Marginable Positions:
If last sale price/share < $5, then maximum ($2.50 per share, 100% stock value)

What this means is “For stocks trading at less than $5.00/share, the margin requirement is the greater of $2.50/share or 100% of the stock value.”

The phrase Short Marginable Positions and the sentence above in quotation marks above might be confusing because in this case, it’s not really margin. That is, you aren’t borrowing money to short the stock. You’re actually required to have $2.50 in your account for each share you want to short or cash/buying power equal to the total short-sale price of the stock, whichever is greater.

For example, if you want to short 1000 shares of a stock at $3 a share, your account must have $3000 in it, since it’s the great number ($2.50 x 1000 shares = $2500).

How about shorting 1000 shares of a stock at $1 a share? The total cost of the stock is $1000. You have to meet the higher of the two figures, so in this case you need a minimum of $2500.

That doesn’t seem so awful, does it? However, what if you had wanted to short 100,000 shares of LSMJ when it was sitting at .0012 a week or so ago? LSMJ is now at .0003. Ah, seems like you would have made some nice change.

However, to short 100,000 shares of LSMJ you have to have $250,000 in your account ($2.50 x 100,000). If you had shorted 100,000 shares of LSMJ at .0012 and covered at .0003, you would have made $90 (.0012 minus .0003 X 100,000 = 90). You made a profit but it isn’t really a killing.

Ok, let’s short a larger amount of shares, 1 million at .0012. This time your profit would be $900. It’s decent money but you would have needed $2,500,000 in your account.

Let’s say you want to increase your profit to $9000, so you need to short 10,000,000 shares. To do so you must have $25,000,000 in your account. I don’t know about you but if I could afford to put $25 million in my brokerage account, I wouldn’t be fooling around with penny stocks. I’d be cruising around on my 200-foot yacht.

Let’s say you shorted 100,000 shares of a stock at .0050 and covered at .0005. Your profit would have been $450 (.0050 minus .0005 X 100,000). Hmm! $450 is ok but you won’t get rich doing it this way.

If you had shorted ten times as many shares, 1 million, your profit would have been $4500. $4500 is nothing to sneeze at, but you would have needed the $2.5 million in your account again.

Continued in Part 2

Can We Short Penny Stocks Within The U.S.? Part 2

Part 2 of 2 Parts



With the two sub-penny examples, we’ve made some cash but shorting them is obviously not the pot at the end of the rainbow some of us may have thought. Sub-penny stocks can’t fall as far as higher-priced stocks, so let’s try a penny stock trading at $4.

You want to short 100,000 shares of the stock. It drops to .5000 and you cover. Your profit is $350,000. What if it really nosedives and you don’t cover until it drops to .0050? Now your profit is $399,500! Whoa, now we’re talking real money! Unfortunately, to have the opportunity to make these kinds of profits, you would need $400,000 in your account.

What if you had shorted 1 million shares at $4 a share and covered at .5? Your profit would be an astounding $3,500,000! If as before, you had waited and covered at .0050, your profit would be a whopping $3,995,000! You would have needed $4,000,000 in your account this time, however.

”Wow! The rich just keeping richer and we poor folks are stuck down here on the bottom,” you say? Well, on the surface, it appears you can short penny stocks to kingdom-come if you’re rich. As a practical matter, it may not always be that easy, even for the big boys. That’s a topic for another discussion however.

Ameritrade has about the same requirements as Interactive Brokers. Detailed information can be found on page 5 in their Margin Account Handbook. You can download it from this link:

http://www.tdameritrade.com/faq/newaccount.html#Can

Click on Margin Account Handbook under the section, “Can I open a margin or options account?”. The handbook will download automatically (.pdf format).

Besides the monetary requirements, I found three other restrictions.

With Interactive Brokers you can only short penny stocks on their allowable list. I’m not sure if Ameritrade has such a list. I didn’t find one on their site or in their margin account handbook. Here’s the link to Interactive Brokers’ U.S. allowable list:

http://www.interactivebrokers.com/en...entity=llc&ln=

You may not be allowed to short stocks already on the SHO list. Here’s the link to Interactive Brokers followed by a section (in italics) from their web site:

http://www.interactivebrokers.com/en...entity=llc&ln=


Reg-SHO restricted stocks are not permitted for shorting. However, IB may allow Reg-SHO stocks to be shorted when inventory conditions permit. The main shortable list defines the actual availability.

Please see following web page from the NYSE for additional information: http://www.nyse.com/threshold/ regarding Reg SHO and restricted stocks.

Lastly, Ameritrade states in their margin account handbook that the shares you want to short must be borrowable. That is, if Ameritrade doesn’t have the shares to loan you, they must be able to borrow those shares from other brokers (no naked shorts).

Once you short the shares, there is no guarantee you can maintain the short position indefinitely. If Ameritrade borrows the shares and the lender of those shares later requests Ameritrade return them, you have to relinquish your shares by covering your open short position. That means in short positions, it’s possible other people can determine when you trade. That’s never good.

I imagine other brokers allowing short sales of pennies will have more or less the same requirements as Interactive Brokers and Ameritrade.

So while it’s possible to short penny stocks with Interactive Brokers and Ameritrade, small traders are prevented from doing so. How many HSM~ers have $250,000 in their accounts, much less $2.5-$4 million?

Shorting the pennies is reserved for the rich, hedge funds and perhaps other institutional investors that have tons of money. The catch is, as an individual, once you become rich enough where you can short penny stocks, you no longer need to.

Good luck to everyone in your trading.

Guapo

VIPM’s Strong Run 04 May 2007 Part 1 of 4 Parts

Thursday 03 May, the day before VIPM’s strong run, someone mentioned VIPM in passing in one of the threads. I didn’t know a thing about the company or stock. I checked the latest price and saw it was .0001 and thought, “Well maybe it will show some activity”, so I stuck it on a watch list and forgot about it.

Then Friday morning a few minutes before the market opened, I saw where VIPM had a new PR.

http://biz.yahoo.com/iw/070504/0248184.html

I read it and thought the PR was perhaps sufficient to make the stock move some, so I started watching it. I was looking to jump-in if it gave signs of moving, ride it up a little and jump off – a quick flip. However at the open bell it took off like a rocket and soared almost straight up. I wasn’t going to chase the stock* so I sat back and watched. I wasn’t prepared for what I saw though.

The close the previous day, Thursday, 03 May 2007 was .0001. Friday morning the stock opened at .0030 and moved rapidly up from there. In less than nine minutes it had hit .0100 and in less than 11 minutes it hit .0150. Say what???? A 9900% gain in 9 minutes and a 14,900% gain in 11 minutes?

Of course, the chance I missed of getting rich off VIPM immediately popped into my head. “Oh, what’s wrong with me? Why didn’t I grab 9 million shares yesterday when it was still at .0001? Or even a measly 3 million shares? That would have cost me only $300. Let me see. 3 million shares at .0150 would have been a profit of $45,000 dollars!! 9 million shares at .0150 woulda been a profit of $135,000. A $135,000 profit in less than a day on a cost of $900! Oh heart, be still!!!!” $135K would have been a good start on the down payment on the 200-foot yacht I’ve been dreaming of for so long.

The stock bounced up and down between .0100 and .0150 until 9:50 AM and then fell for a few minutes when suddenly about 10:02 AM it jumped to .0150 again. It bounced up and down again for a while, hitting its HOD** of .0150 for the final time. The stock declined the rest of the day closing at .0050, a gain of 4900%.

On the surface, it appears I missed a great chance to put some heavy bread in my pocket, doesn’t it? Ah, but only if it were that easy.

The clue that something’s amiss is the large percent gains, 9900% in 9 minutes, 14,900% in 11 minutes and a closing gain of 4900%. Whoever’s heard of a penny stock making those kinds of gains so quickly in one day? Has one ever gained 14,900% in a full day? Perhaps there are a few but I’ve never heard of them.

A penny stock running to a 14,900% gain and closing up 4900% for the day is rarer than a dodo bird, so first we’ll explain the reasons why the stock showed such phenomenal behavior. Afterwards we’ll look at the charts*** and draw some conclusions from VIPM’s run.


If you think about it, the gains shown by VIPM are simply stunning. In fact, they are misleading. Here’s why.

The percent gain is calculated by subtracting the closing price of the previous day (Y = previous day’s close) from the current price (T = current price or closing price for the current day). This sum is then divided by the closing price of the previous day (Y) and multiplied by 100.

%Gain = (T-Y)/Y * 100

VIPM closed at .0050 (T) last Friday. The previous close the day before was .0001 (Y),

So: %Gain For the Day (Friday, 04 May 2007) = (.0050-.0001)/.0001 * 100 = 4900.


Here’s the rub. The closing price last Thursday, the day before VIPM’s run, was .0001.

I took a look at the time and sales data**** for VIPM for the period of 30 April - 03 May. That’s Monday through Thursday, the four days before VIPM’s run. The data wasn't complete but the lowest price where shares were bought or sold was .0028. There were two or three trades at .0028. There were more trades at .0030 however.

Additionally some HSM~ers that have been following VIPM posted that the stock hasn’t been available at .0001 for months. The last trade last Thursday was a small block of 100 shares at .0001. As someone pointed out, this was probably MM~s moving shares around. Nevertheless, this .0001 figure is the closing price of the previous day and is what was used in everybody’s software calculating the percent gains for VIPM last Friday.

So it appears the cheapest anybody could have bought VIPM last week, and perhaps for months, was .0028 or .0030. So if you had spotted VIPM last Thursday and had decided to buy some shares, you would have probably paid .0028 or .0030 per share.

We’ll recalculate the percent gains with the more realistic number of .0030 as the closing price for last Thursday, the day before VIPM’s run.

HOD %Gain = (.0150 - .0030)/.0030 * 100
HOD %Gain = 400

%Gain For The Day = (.0050 - .0030)/.0030 *100
%Gain For The Day = 67

These figures are much more reasonable and in-line with what we expect penny stocks might do in strong runs.

Continued in Part 2

VIPM’s Strong Run 04 May 2007 Part 2 of 4 Parts

The stock opened at .0030. According to the time and sales data used for this article, the first trade was actually executed at .0055 with the next order executed at .0065. When the market opened there was one order at .0028. It’s not shown in the time and sales data. I don’t know whether the .0028 trade were the MM~s moving shares around or not. If you’d had an order placed at the opening bell and were lucky, perhaps you could have gotten shares at .0028. Probably you would have paid .0055 for them however.

Let’s assume .0055 was the cheapest you could have picked up shares Friday morning. We’ll use it as the close for the previous day.

HOD %Gain = (.0150 - .0055)/.0055 * 100
HOD %Gain = 173

%Gain For The Day = (.0050 - .0055)/.0055 * 100
%Gain For The Day = -9

So while the numbers last Friday showed absolutely staggering gains, a HOD of 14,900% gain and a 4900% gain for the day, that wasn’t the real world case at all. If you weren’t holding shares at .0001, you wouldn’t have experienced these gains. In fact, if you had purchased shares at .0055 at the opening bell and held your shares all day, you’d actually be down 9%.

In Pennyland, things are not always as they seem.


Ok, onto the charts (shown in Part 4 of this article). Take a look at Chart 1. As you can see the PPS went almost straight up at the opening bell, reaching its high of the day (.0150) a second time about 9:21 AM (Point A on the chart). Regardless of what the percent gains show, that’s a great run.

The stock dropped to .0100 about 10 AM and then turned around and climbed to .0150 again (Point B). After Point B, the run was over. The stock declined overall the rest of the day, closing at .0050.

Take a look at the red down arrows. Those show areas where there was little or no trading. What happened here? Was nobody buying or selling? Regardless, if you had been holding shares the most opportune time to sell would have been in the first 15 minutes of the run and again when the PPS moved up to .0150 the last time (Point B).

If you’d tried to sell in the dead spots, you might have had problems getting rid of your stock, especially if you were trying to unload a large volume of shares. This is just my opinion based on experience with past stocks. I don’t know for sure however since I wasn’t holding any shares and therefore couldn’t sell any. BTW, if I had been holding shares that I’d picked up earlier at .0030 for example, I would have definitely sold in the run-up.*****

Oh, that’s great. You had some shares but how do you know when to sell? You can sell when you’re satisfied with your profit. You can establish specific percent gains or prices where you’re willing to sell at and when those gains or prices are reached, unload then.

Many folks use the charts with indicators to determine when to sell. While I’m not a great believer in charts predicting what a penny stock will do in the future, two hours from now or tomorrow for example, they are useful for determining exit points.

Continued in Part 3

VIPM’s Strong Run 04 May 2007 Part 3 of 4 Parts

Ok, what do the indicators show?

First a word of caution. If you’re going to use them, you need to understand what they show. Simply plugging-in a few indicators and making decisions based on what you think they are telling you can lead to serious mistakes. I recommend you devote some time learning TA if you're going to use it in your trading.

Take a look at Chart 2, with the Parabolic SAR indicator. This one is fairly easy to use and you can set it to actually show buy and sell points.

From the left side of the chart, note the first down red arrow. The indicator is telling you this is a sell point. If you had been holding shares you had bought previously, at .0030 for example and had sold here, you would have had a nice profit.

Note the next arrow from the left, an up green one. This is a buy point. If you had purchased shares here and sold at the third arrow from the left, another red one at .015, you would have had another profit.

One word of caution. With penny stocks, simply because an indicator shows you buy and sell points doesn’t mean you can always do so quickly at those spots.

Penny stocks are thinly traded. Even one that runs may not have many trades during the day, relatively speaking. VIPM had 361 trades last Friday. While that’s not bad, it’s not really a lot either. Consider too the majority of the 361 trades were executed in the first 20 minutes of the day. At the first red arrow on the chart, the run was basically over. People were selling then. It’s quite likely you would have had difficulty selling your shares exactly at the first red arrow. I’m not saying you couldn’t have because we don’t know for sure, but it’s a possibility you have to consider.

At the first green arrow, it may have also been difficult to buy shares. From the first green arrow to the 2nd red arrow, the stock moved from about .0100 to .0150 on about 4 trades only. However, if you had managed to get shares at the first green arrow, it appears from the chart you would have had more time to sell them once you got the sell signal at the 2nd red arrow, since the stock fell more slowly from this point, down to the 2nd green arrow.

Many folks prefer to use other indicators such as the MACD and RSI (There are dozens you can use). Chart 3 shows the additional indicators, MACD, MACD histogram and the RSI. You need to use larger more detailed charts if you are going to trade from them but all three indicate a downward trend at Point A, possible sell points.

I’m not a TA expert (technical Analysis – the charts) so anybody skilled with them is invited to post their comments here discussing the best way to have played VIPM last Friday using the charts.

So IMO, if you’d been holding shares you had purchased previously, you could have sold in the run-up last Friday morning. If you had managed to get shares early Friday morning right as the market opened, you could have sold quickly thereafter for a profit too. Picking up shares at the first green arrow on Chart 2 and flipping them may have been possible but difficult I think.

What will VIPM do this week? Another long article is required to address all the possibilities. Nobody knows for sure of course. If you want some ideas to help you estimate what a penny stock will do in the near future, take a look at the article below, especially Part 3.

How To Find And Evaluate Penny Stocks For Trading
Pages 16-17 Posts 157-167

Link to page 16: http://www.hotstockmarket.com/forums...=36435&page=16

Good luck to everyone in their trading.

Guapo

*Chase a stock – To buy a stock at an elevated price during a run.

**HOD – Highest PPS of the day

***Charts – All charts provided by the QuoteTracker program. www.quotetracker.com (The program can be downloaded and used for free)

****Time and sales data – Trades listed by time and volume. (Provided by the QuoteTracker program). You can download the data at: http://www.savefile.com/files/699910

***** - Assuming the philosophy is to trade the pennies, not hold them long-term.


Continued in Part 4

VIPM’s Strong Run 04 May 2007 Part 4 of 4 Parts

VIPM Chart 1 04 May 2007



*********

VIPM Chart 2 With Parabolic Sar 04 May 2007



*********

VIPM Chart 3 With Multiple Indicators 04 May 2007

Update: Three Reverse Splits - WNSH, IVOC & IPRE

These are three companies that did reverse splits last year, where stockholders’ lost a large percentage or almost all their money.

Current symbols:

WNSH – still WNSH
IVOC – now IVOI
IPRE – now IPEI


Original WNSH article, Page 21 post #205:

Title: Two Reverse Splits – Real Examples Part 1

Link to page 21:
http://www.hotstockmarket.com/forums...=36435&page=21

The post-split PPS was .875. The stock tanked after the reverse split in January 2006. It was sitting at .0008 on 02 June 2006. WNSH finally bottomed-out at .0001 where it has remained most of the time.

The company had another R/S scheduled for January of this year but canceled it. There are now rumors of a reverse merger. Just today, 08 May 2007, the PPS jumped to .0002 from .0001, most likely caused by the rumors of the reverse merger and some hype on the boards.

Here it is 16 months after the reverse split however. Investors who have held through the reverse split haven’t recovered a dime of their money. In fact they’ve out almost 100% of their cash.



Original IVOC article, Page 21 post # 206

Title: Two Reverse Splits – Real Examples Part 2

Link to page 21:
http://www.hotstockmarket.com/forums...=36435&page=21

The company announced a 1/200 reverse split, April 26, 2006. The post-split PPS was about .18. By 02 June of 2006, the PPS had lost half its value and was sitting at .0090. The PPS today 08 May 2006, over a year after the reverse split, is .0013. Investors continuing to hold have experienced about a 93% loss.



Original IPRE article, Page 23 Post #226

Title: More On Reverse Splits – IPRE

Link to page 23:
http://www.hotstockmarket.com/forums...=36435&page=23

The dates and prices are approximate for this one since I didn’t keep any records at the time of the reverse split. IPRE did a 1/500 reverse split about the middle of October 2006. From the IPRE/IPEI threads, the best I can determine is the post-split PPS was somewhere about .20-.25. The chart shows a post-split PPS of .30. It doesn’t really matter if the post-split PPS was .20, .25 or .30. The PPS closed 07 May 2007 at .015. Regardless which post-split value you use to calculate your percent loss, it’ll be over 90%.

Take a look at the IPEI chart below (From Stockcharts.com). The post-split price is at point A. If you had sold immediately after the reverse split (assuming that was possible), you could have gotten most of your money out, point B. The stock initially held its post-split price pretty well for about a week, point C.

If you had waited the week or so after the reverse split, around the 3rd week of October 2006 to sell, point C, you could have still recovered about two-thirds of your money.

If you have waited until 01 December, you could have recovered approximately half your money. To have sold your shares and recouped half of your investment at this time would have been wiser than continuing to hold. Dilly-dallying further would have cost you even more.

The stock finally tanked, 18-19 December 2006, point D, stabilizing temporarily around .0250. Anybody still holding when the slide came to a halt would have been down about 90%.

In March of this year, the PPS recovered somewhat and move up to about .08, point E. Folks still in the stock could have sold here and retrieved a little more cash, roughly one-third of it.

One third is better than nothing, right? You bet it is, because after hitting about .08, the PPS took another steep dive to where it’s at today, point F. I don’t anticipate investors recovering much of their money in this one either.


BTW, the latest stock to drag its investors through a reverse split was MUME, now MUMI. MUME did a 1/1000 reverse split on 27 April 2007, about two weeks ago. Almost immediately, it lost 88% of it post-split PPS of .1000. The stock has regained some of its losses, sitting today at .035.

Folks that decided to ride out the reverse split are now down about 65%. It’s chancy whether they will ever recover all their cash in this one too, because trading has dropped to almost nothing, small volumes with very few trades each day. I anticipate MUMI to decline further as time passes.

The trading patterns of penny stocks that undergo straight reverse splits can vary. Not all of them collapse immediately after the reverse split. Frequently an investor has an opportunity to retrieve at least some of his cash. However almost all pennies that undergo a reverse split eventually cost stockholders a large percentage of their investment. Generally, the longer one holds after a reverse split, the more money he will ultimately lose.

Guapo

Stock Patrol Article - The Penny Stock Epidemic

13 May 2007

I recommend everyone read this article on penny stock fraud on the Stock Patrol site. It details the characteristics (Red Flags) of fraudulent penny stock companies involved in various nefarious schemes; the most common one being pumps and dumps of course.

Here's the link:

http://www.stockpatrol.com/article/k...ystockepidemic


The simple fact is that almost all penny stock companies fail. Very few of them ever become successful.

Play the pennies. Don't buy and hold them long term, believing all the hype that your favorite penny stock will make you rich.

Guapo