Buy XYZ Stock NOW to Own USA's #1 Oil Stock
Sell every major oil stock you own right now, then buy every share of XYZ stock you can get your hands on up to $X price.
Have you ever got one of these letters in the mail? Have you ever bought the stock that they were recommending?
These sales letters are well written and very compelling, but do their recommendations ever deliver what they promise? I've been getting these letters for years and I can't say I recall any stock that was ever bought out by a major company sending the penny stock skyrocketing.
I have purchased a couple of these recommendations and made some money too. But you have to be careful if you're thinking about jumping in on these risky investments. Most of these companies don't have any revenue and have never turned a profit. The sales letter is designed to push the price of the stock higher by enticing wary investors to call their broker the next day and begin buying.
I'm speculating that someone, whether it's the authors of the letter or someone else, has purchased a gazillion shares of this stock for pennies and now they are trying to get people to push the price up at which point they will start selling for huge fortunes.
I just received a letter and even though it is dated November 2008 and suggests that the stock will enjoy a spectacular rise in the next 10 months, I have received this same letter promising the same thing for the same stock over 10 months ago.
The letters are very compelling and make good arguments for why the stock should rise, but really I don't know how much, if any, of this information is true. I'd be jumping into the market completely blind by buying this stock. Sure I can do some research on the company, and I have, but usually the company is so new or has little to no financial information available, it's impossible to make a decision on that alone.
Now if you feel so compelled to try buying one of these 'shot in the dark' stocks, here's what you should look for.
Remember, these sales letters are designed to drive the price up. It's likely that when the letter was originally written the price of the stock was at or near the price suggested in the letter, but it may be higher by now, since it is unlikely that you are the first to receive this letter.
Get online and find a website that you can chart the stock symbol. I use Marketwatch.com. If the stock has already risen substantially on high volume and looks like its peaked and is turning back down, then stay away from this stock unless you like losing money in the market.
If the stock has started to move higher, but has not moved up substantially, then you might be able to take some high risk money you don't care if you lose and plunk it down on this trade.
BUT, watch it carefully and do not be afraid to take your profits. This is NOT a long term trade, it is a very short term trade that could last as little as a few days. Once the stock seems to run higher in a frenzy, get out! That could be defined visually by a large intraday trading range and extremely high volume uncharacteristic of the stock.
I once was fortunate enough to get in on one of these stocks trading around $4.5 - $5 at the time. The Stock ran up to $15, I sold it at $14. It now trades for under $1 and it traded for under $1 even before the stock market wipeout.
Good trading to you.