Anatomy of a Pump and Dump (And How To Profit From Them)
Below is a weekly chart for all five of the companies. You’ll note that all charts are showing:
- A long (multi-year) basing pattern after a big down trend.
- Bullish divergence between between price and my favorite accumulation indicator, Twiggs Money Flow (TMF).
- A recent cross above the 0% line on TMF – experience has shown me this is often hints a move is imminent (and divergence that occurs without a cross above zero often amounts to nothing).
- Very little interest in the stocks – typical weekly volume levels are very low.
Before buying stock in any of these companies, I would usually conduct at least a good five to ten hours of due diligence research looking into factors such as:
- Management credentials and past performance
- Percentage of the company owned by management
- Recent broker vs retail investor buying activity
- The companies cash position and near term expenditure estimates
- Near term relevant market sector forecasts
- Product reviews and customer feedback (if applicable)
- Review of the geology and/or nearby mines or discoveries (if applicable)
- Etc. etc.
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