Understanding the pond fishing play. Pump & dumps, Temp Jobs. And the OTC game in general. A must read !
First I'll answer you question. No it's not a pond fishing play. Why? Because there was no prior price pull down indicating new funding level wanted.
This one is a mini book. I was in the mood, after a long day in the yard. LOL
One has to understand whats happening and why, to understand the pond fishing play and OTC game.
I post the OTC is a GAME. It's a game where big guys get large amounts of new company shares for funding. Then they buy a emotion run to sell those shares to retail. Or pro trading groups or single big traders accumulate large amounts.
This is the basis for the chart setup when I explain about the pond fishing play. The price is high with little volume. Boring, no one interested or trading. Management has been looking for a VC to lend cash for stock and a equity debit loan, often with warrants.
Remember startup companies have no business except selling stock, before the product is in production and producing marketing revenues. And to reach that level of business, it needs cash to grow the business. So there real business is raising cash and their secondary business is what ever they are trying to do.
Once management and a venture capital firm (VC) is working on an agreement. The stock price falls to the exercise level. Meaning the price shares are going to be issued to the funder for the loan. You hear or see nothing about this funding deal, but the act itself tells you funding is coming.
Since insiders know funding is coming, they will buy their own stock at the bottom funding price level. These are the 3 volume surges without price change. Because know one is following the stock, but them. They can buy without causing price change. Holders are happy to get out. Ask buying is easy. when retail is bored and holding a stalled uninteresting stock for a long time.
Now the setup is in place. VCs and management reach an agreement, Insiders and friends have accumulated, now comes the play. Large amounts of new shares are issued to the VC for a cash loan. Say $250k with a stock price at .005 or 50 million shares. The loan carries an interest rate of 5% over 3 years and has 25 million warrants attached at 50% unders the 10 day VWAP (value weighted average stock price) at execution. VCs like this, just incase the company does succeed, they can get stock on the cheap in the future.
So big guys have 50 mil for sale, a debit loan they never expect the startup to be able to repay and if for some rare reason the company uses this cash and does grow and succeed. Future warrants can be exercised to fund the company again at a 50% discount.
The company gets $250k cash and can now try to grow the business. But knows it probably will need more cash as growth takes place. So they need to keep their VC funders happy and ready to fund again. Warrants and preferred is a way for them to keep the VC on the line. Helping VC runs with PRs is the way they keep them happy. There is nothing happier then a greedy big guy with large profits under their belt. Did it once, can do it again thing.
They do this buy helping them sell their 50 mil and their own personal accumulation into an emotion run to retail, by desigining a PR growth & execution plan. And timing the PR releases to stall points wihtin the bought run. Which keeps retail emotion high during the fleece.
That is whats happening and why, behind the OTC game curtian.
What we see is the price pull down, 3 volume surges with little or no price change. Then a price and volume double is bought by the VC firm, to gain retail interest. And the play starts.
Since VCs want to move 50 million shares or $250k worth, they need at least $50k a day retail interest levels. 100 mil a day average for triple zero stock, 10 mil for double and 1 mil for single zero stocks. Most runs last 3 to 5 days and to dump $50k a day, well above the .005 price they got the shares at, they need that interest level before anything starts. This the pump stage of a run to get their original investment back, with profits.
If enough interest isn't attained by the attention pop and a PR could be issued by management to help the VCs and keep them happy and willing to come back and fund more when nedded.
Keep in mind I'm pulling these numbers out of my example head. Each darkside play has it's own turn over numbers and timing planned. Some plays involve more cash, some longer times, some at lower price levels. But you can get the idea of the game taking place. Some need PR help some go parabolic. But all continue until all big guy shares are sold to retail.
Now we're at stage 2. The finish of the game. The run was bought, story PR help issued, emotion high and the climb stalls some, say day 3. The company now releases the 2nd timed PR to push for the last VC shares to be sold higher. And when this is done the run ends, with a high emotion exhaustion candle and a red day to follow. ALL SHARES HELD BY BIG GUYS ARE SOLD.
Retail wants to buy more higher, but no one has large amounts of shares left to sell higher, to continue to feed the run. The candle spikes high and comes back. No one selling higher the next day and you see red.
Remember most emotional retail does not sell in runs, they buy. So they hold waiting and wanting more and the late comers start getting in on the profit taking retrace, by experienced traders, giving them a buying op. LOL
Stage 5 the dump
It's over. there are no more shares for sale. Day traders move in, create a stall for 3 to 5 days. Manipulating daily gains, then leaving with a FIBs bounce, selling out as volumes fall.
Retail is left to deal with the aftermath.
Temp jobs are planned from the get go with tier funding and story telling to last 3 months. No price pull downs are needed. But you can find these coming, by seeing strong CMF accumulation over months and conflicts in the support indicators. Where stoch RSI say BE OUT and CMF buy pressure is strong or the reverse. Accumulation is seen with support indicator in conflict.
Temp Jobs usually involve companies closer to success, which have had several previous funding deals completed. They often involve debit restructuring or preferred conversions (monthly over 3 months) Tier funding, from previous deals, as a form of new funding for the company and large amounts of new shares in VCs hands. Each tier (conversion) is implemented on success of the previous PR story moving price higher each month.
Done hope all this can be absorbed with out too much confusion. It plain as day in my head, but hard to put into words. One must keep in mind. There is no perfect balck and white setup or example for the OTC game. Each has it's own wants, needs, and goals. But the core to the game is greed and success. VCs have the greed, sometime the management also. But non scam companies have success in mind. They just have no other way to grow their business. It's a shame it has to be on retails back.
Do what the big guys do!
Never believer the PR story, trade retail reaction to it.
And your wild west experience will be a more profitable one.