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Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall -- Ignore unavailable to you. Want to Upgrade?

To: the options strategist who wrote (4)	5/11/1998 9:01:00 PM
From: HeyRainier	Read Replies (2) \| Respond to of 108

Jen, RE: the stocks we're looking for, the point-fall is probably going to matter less than the actual percentage fall. When companies are caught with their pants down with troubling financial statements, what subsequently happens to the stock price truly defines the term "correction." One example is Medaphis Corp (MEDA: current price 7.875), which was profiled in Microsoft Investor after the whole thing had unravelled. The stock price on Aug. 15, 1996 fell 60% (from $35 to $14), and that was eight months after the trouble had been spotted. So you can see that the market is not quite yet as efficient as they are when adjusting to bottom-line earnings reports (because not everyone looks at the financial statements as closely as they should!) Another example, Boston Chicken: if you're interested, here's the Business Week article that outlined the problems well before the stock faced its massive decline (you'll have to register if you already haven't, but there will be no need to pay for fees if you select the "free services" option): businessweek.com@@5NnejoQAIqyVwgAA/1996/43/b3498139.htm There was an individual here on SI who was able to capitalize on this. This "Candle stick" even started his own thread about the problems at Boston Chicken: exchange2000.com When the Business Week article was released (the October 21, 1996 issue), the stock was trading at 35, and still did not yet peak until it hit the 40's a few weeks later. There was plenty of time to catch these and to pyramid down one's short position for really big gains. Anything that raises a red flag would be worth considering. Now how about that Sunbeam (SOC)...I'm interested in seeing if the recent shortfall could have been foreseen. Regards, Rainier