*** Read this and I promise you won't be sorry! ***
"Psychology" is a great word to explain how the short term trading game works with questionable stocks (which, IMO, includes CSGI).
Here's how the game is played...
1. MMs and their cohorts pick a stock and start churning it (trading it back and forth) to get the volume up to make it appear to be active. FYI, for NASDAQ stocks this is estimated to account for 59%(!!!) of ALL the volume. Also, for NASDAQ stocks a MM inserts him/herself 98% of the time, vs around 10% for the NYSE and AMEX (source: Forbes magazine 7/29/96).
2. Then they start hyping it like crazy, usually posting messages with "BUY <stock name here>" in big letters. Well, a few people figure what the heck and they buy some.
3. Since the stock is usually thinly traded to begin with, the stock price goes up. Of course, this leads to more hype along the lines of "<stock name here> UP 1.5!!!", which then makes more people believers and thus investors.
4. When the stock reaches a certain point, we see something like "<stock name here> could reach <huge number>!!!". This gets those on the sidelines to dive in, and also serves to get more $$ from the converted who figure, what the heck, I'm already up on my previous investment.
5. Now, those in the "know" start selling. Stock price stays somewhat steady because it is offset by those still believing in the hype. Eventually when they start unloading, the price does fall. At this point you see messages like "big volume, must be profit taking, don't worry".
6. At this point the MMs have to determine whether there is mileage left in this stock (ie. people believe a big deal is in the works) and will still invest, or whether they should abandon it entirely. If it starts to go back up, go back to step 1.
Year 2000 companies are VERY vulnerable to this type of manipulation as everyone tries to pick a winner from the pack (which numbers around 100 on the year2000.com web site). At least if you understand the game, you, too, can make big bucks. Then again, one wrong move and you're toast. Good luck!
- Jeff |
