Penny Stocks and the “Pump and Dump” Pattern

Penny Stocks and the “Pump and Dump” Pattern

📚 Penny stocks are shares that trade at a very low price, generally below $5 per share.

📖 These stocks belong to companies with a small market capitalization, meaning the total value of all their shares in the market is relatively small.

📊 The “Pump and Dump” is a common pattern in the penny stock market where stock prices rise rapidly and then fall. This pattern develops in 7 steps:

1-Pre-Pump or Promotion: The stock begins to be heavily promoted.

2-Ramp: The stock price starts to rise.

3-Supernova: The price reaches its peak.

4-Cliff Dive: After the peak, promoters and early investors begin to sell their shares.

5-Dip: The stock falls significantly.

6-The Dead Pump Bounce: After the initial drop, there may be a small bounce in the price.

7-The Long Kiss Goodnight: Finally, the stock stabilizes at a low level.