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Microcap & Penny Stocks : The New Corporate Vision Inc. ( CVIA ) -- Ignore unavailable to you. Want to Upgrade?

To: Michael Graham who wrote (1958)	5/17/1999 2:28:00 AM
From: flash	Read Replies (2) \| Respond to of 3596

Markets, Monkeys, and Deception by David Reiner Deception is a constant; it can be found at any time, any place. Athletes use it to fake out a competitor, politicians use it when they speak, and markets use it to trick you into doing what you should not do. Some primatologists refer to deceptive prowess among primates as a rationale for the development of the large primate brain. The ape with the larger brain outsmarts other apes for food or a mate, and goes on to reproduce. In the jungle of financial markets you need to be smarter than the average market monkey who will do anything to steal your bananas, otherwise you will soon experience the harsh reality of the market's version of natural selection. Strap yourself into your seat and get ready, because we are about to embark on a safari deep into the realm of micro-cap markets to observe the behavior of the various market monkeys indigenous to the area. The Trap A formidable market monkey is the dishonest stock promoter of a worthless company. He preys upon the naïve by offering a false gift of hope in the form of a company that is the "opportunity of a lifetime". Once enough people buy into the company, the promoter sells into the volume and the stock begins to tank. Beware of any stock when its price stagnates during high volume. To avoid being trapped into holding worthless stock certificates, always investigate the company. Chaos The introduction of Bulletin Board stocks into automated quotation systems, coupled with the informational tools available to the general public, have generated a great deal of interest in micro-caps. Now traders can follow Bulletin Board stocks tick by tick via software or the Internet, access news services, and trade with an on-line discount broker. As a result of the aforementioned, the dominant market monkeys (the market makers) have created an added element of chaos to the already volatile intra-day price movements created by day-traders. Since a large percentage of trades in the Bulletin Board market consist of short-term or day-trades, market makers view the barrage of buy and sell orders as relatively neutral to the marketplace. When the average Joe buys shares in company XYZ, the market makers know it is very likely that he will want to sell back his shares relatively quickly. Hence, market makers sell into the buying and then downtick the stock in an effort to "shake out" the weak. Since it is tough to know for sure whether a move is the beginning of a trend, or a routine shake out, this type of deception works quite well. The Fake Out Fake outs are more deliberate moves market makers use to coerce you into buying or selling. For example, market maker A is short shares in stock XYZ. Market maker A knows the company is going to issue a positive news release soon, so mm A is going to want to cover the position. Now Market Maker A calls up his friendly market maker B and says "pork fried rice" and mm B, along with other "friendly" market makers initiate a downtick about the same time. This gives the illusion of weakness designed to impel selling. The fickle sell out, allowing market maker A to cover his short position at lower prices. Market makers aggressively deny any sort of collusion designed to fix quotes or spreads, but a recent SEC investigation tells another story. Undeclared short-selling and market maker collusion are two very important topics we will analyze in the future. I don't intend for these brief examples to magically transform the descriptive into the predictive, but the more you know your opponent, the better prepared you are. Markets infinitely abound in deceptive activities, and it would take more than a lifetime to figure them all out. Further coverage of deceptive activities perpetrated by market monkeys will be found in future essays. So how does the average speculator manage to overcome deception in micro-cap markets? One answer is indirection. In warfare, if the enemy has an advantage due to position or other factors, direct confrontation is a death sentence. An indirect approach aims to weaken resistance before overcoming it. Drawing the enemy out of its defenses easily achieves the desired effect. Your enemies, the market monkeys who use every trick in the book to steal your bananas, have informational and positional advantages over you. They know the management well and are aware of what happens within the company. Furthermore, market makers are in the position to wield a great deal of influence in OTC:BB stocks when it suits their needs. The inherent power dealers' garner enable them to move markets at any time. As a result, you must draw them out of their favorable position. To draw a market maker of his or her advantageous position, you must find the great company before the games begin. Searching for the Holy Grail of the Bulletin Board stocks is going to require an extensive amount of research time, but once you have found it, you are one up on the pros.