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Sunday, May 21, 2006 2:45:59 PM
NEVER EVER EVER (EVER!) buy a penny stock with a rumored or real short position.
You WILL lose all of your money. Why?
Because, if it's a REAL short position - then you are out of your depth as a retail investor. Offshore naked shorting is done by peeps who are ruthlessly trying to destroy a stock. And they know much more about trading than ANY of us. And sad to say, their b*lls are twice as large. If the price does go up a little - they won't cover. They will laugh, spit in your face, and short twice as many.
If it's a rumor, then it's usually initiated by mangement themselves. Quite often, when a corp has nothing to offer in terms of revenues or good news - they'll make up some lie about shorts, promise the killer end-all-squeeze-of-a-lifetime, and hire the drunk over at buyins.net.
HOWEVER - there is one good time to buy a stock with a short position:
When the squeeze is on. Then your buys only drive the price higher and hurt Shorty more.
I have been fortunate enough to buy into a squeeze three or four times in the past year. Never made less than 300%, and I usually made it in less than a day.
Good stocks are obvious. Extensive DD is how you convince yourself to buy a bad one.
>^..^<
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