"...Sometimes the company itself engages in the promotion, and other times the insiders hire promoters to pump the stock. In any case, you begin to see streams of press releases and/or "research reports" from companies that you never before heard of. There's a remarkable similarity between them (after all, promoters know the buzzwords that will draw in the rubes) -- new technologies that will revolutionize an industry, imminent cures for dread diseases, and so on.
Of course, none of the garbage is true, and once the insiders have sold out, the hype machine shuts off. Once the hype dries up and there are no new "investors" (and I use that term very loosely), the accumulation pressure evaporates, the stock crashes, volume dries up, and investors go away licking their wounds and wondering how they'll explain a $15,000 loss on Cool Research and Products (symbol: CRAP) to their spouses.
The nature of the hype is also a good warning. Since these companies are overwhelmingly just junk (usually without products or real sales), the promotional material always talks about the fantastic future -- great new products about to be released, lucrative contracts with major companies just about to be announced, and so on. Ask any of these companies about what's going on today, and you'll get blank stares and quick attempts to turn the conversation to the glorious future."
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