ECRY - I Like This Stock!

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A week ago, www.pennystockjockey.com profiled ECRY.OB. And it moved up nicely in the next two days.

Then something went horribly wrong, and it came crashing down to the same level it was when it was profiled.

Was this a bad thing? Perhaps. I mean everyone that bought on that alert had a chance to make money...good money, fast. (Isn't that the best type?) Should it have kept going up? Unequivocally, yes!

But it didn't. Reasons? Could be shorters, could be people that were holding from the last promotion and waiting for liquidity. Could be one shareholder with a big block that couldn't wait. Could be a number of things. Truth is, it doesn't matter why. A better question, is what should be done about it.

ECRY promoters, if you're listening, here's what you should do. First, let shareholders know that if they missed the first round of promotion, that this is a good time to get in...and for those who bought too high, this is a good time to average down.

Second, make damn sure there is Round 2 and preferably even Round 3 to the promotion. It makes no sense to do these hit and run shows. What makes sense is to continue the story once you start to tell it.

Shareholders, here's what you should do. First, call the investor relations line and let them know you're shareholders. Loud shareholders often prompt companies and promoters to get back to work enhancing shareholder value (that's what they're there for, remember?)

Second, if you own the stock, look at averaging down. I don't think this one is heading to the garbage heap. Its got too much going for it, including a kick butt technology whose time really has come, and a TV ad campaign.

Think on it.

Ok, thats my rant for the day.

The Sedate World of Penny Stocks

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On May 17, 2010, I witnessed one of the most sedate days I’ve ever experienced on the market. I operate in the world of penny stocks. Those stocks traded primarily in the Over the Counter Bulletin Board and Pink Sheets markets.

The volume had dried up and everyone kept saying it was due to Europe’s bailout package of the so called PIIGS nations (Portugal, Ireland, Italy, Greece and Spain). I really doubt that since your average penny stock speculator doesn’t play in the same realm as those funds destined for things like bailouts, or mutual funds or even treasuries.

So what do I think caused the dismal volume that day? Simple. The promoters were getting tired. I don’t mean they weren’t working…I mean they were using the same old, same old type of promoting to try to entice speculators into taking a shot on their particular deals.

Let me give you an example. On Friday May 14, 2010, one of the best known and followed email lists in the business profiled a little company that hadn’t traded all that much before. The company, ticker symbol ECRY.OB, shot up from around $0.50 to over $0.70 and traded almost 3 million shares on the day.
On Monday May 17, 2010, the same list put out an alert on another company FLPC.OB and traded about 400,000 shares up to $0.78.

Both are good companies, so what accounted for the difference in interest? I contend it is the promotion. ECRY.OB had, and still has 30 second commercial spots airing on CNBC. It also is an Alliance Partner with Research in Motion (NASDAQ:RIMM). In short, it is doing the right things to convey a sense of stability in a volatile world on an even more volatile trading exchange. In short, it is doing things differently, counting less on faith and more on substance.
No one in their right mind would advertise on television and invite that kind of scrutiny unless they knew they could stand up to the scrutiny and ensure their claims were genuine. I haven’t seen a penny stock advertise on TV for a very long time – years in fact.

So what kind of measurable impact did this have on speculators? On day one of the promotion, the stock traded huge volumes. On day two of the promotion, May 17, 2010, when other issues were struggling for any type of volume, the company managed to trade close to one million shares. Liquidity is the lifeblood of any exchange and promoters provide it on the penny stock exchanges.

Lets face it, liquidity is the name of the game. That’s the whole reason people invest in stocks rather than real estate. So they are liquid and can get in and out at their convenience. Put another way, what’s the point of being invested in anything, even a stock, if the price of that investment keeps going up, but you can never sell it or monetize it in any way? It is absolutely useless.

Penny stock promoters who provide that liquidity deserve our respect. They are the ones allowing efficient functioning of the market.

The DOW’s Wild Ride

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Anyone who’s in the markets noticed that the DOW opened significantly lower on May 6th, 2010. That in itself isn’t a noteworthy anomaly. What is significant is that around 2:30pm EST, the DOW plunged almost 1000 points in about 15 minutes.
It’s the largest single drop in the history of the DOW.
Now its time to put on our CSI hats and try to figure out exactly what happened.
Four possible explanations have been put forward by the pundits. I intend to analyze each one of these explanations, in plain language so that readers who aren’t experts in world economics or fancy derivatives can also understand, in layman’s terms what’s going on.
First, there’s the fat finger trading rumor. Rumor has it that a trader working for CitiBank accidently pressed the wrong button when selling some Proctor and Gamble stock. The trader apparently typed in a “b” for billion, instead of an “m” for million when making the trade.
To this, I say, let’s get real. A seasoned trader isn’t going to make that mistake. And even if he did, as soon as his position was sold, he would’ve corrected for it immediately before he was short an extra few hundred million shares. So I would be really surprised if that’s what happened.
Second, everyone said that concerns over BP’s oil spill in the Gulf of Mexico had something to do with a coming market correction.
Right! BP stock was actually up after the spill?!?! WTF? Its true. Check it. BP has caused one of the largest environmental catastrophe’s of recent times – in Alaska, fishermen are still complaining about the effects of the Valdez spill 21 years ago – and its stock moved up. Either someone has a great insurer, or a great promoter. Either way, it cannot have affected the DOW.
Third, a lot of pundits have pointed the finger at Greece. A Greek default, they say will cause wide spread havoc in the markets and undoubtedly had something to do with the DOW’s fall.
Not a chance. Here’s why. Take a look at history. That’s the first thing that anyone who’s about to lend money, whether its to a friend, a business or a government, is history.
Greece has one of the worst histories of default in the world. Its as bad as Argentina when it comes to default. So no doubt that was already priced into the debt when it was underwritten.
Greece also was in no danger of not getting their bailout package. A unified Europe, the goal of the EU with the Euro, has been an idea that has been around thousands of years…Alexander, Napoleon, Hitler…all had the same dream, although some of those guys turned it into a nightmare.
And lets not forget…the bailout is coming from essentially the same people who are holding the bonds that were defaulted on in the first place…the European community. So they just gave a dying investment a shot in the arm in order to save money already sunk.
In other words, it has very little to do with America and the DOW. Greece doesn’t produce anything besides olive oil. So it imports almost everything it needs for a quality lifestyle. Unfortunately, America doesn’t produce much…so it won’t be hurt by a lack of imports from Greece.
The final reason postulated for the downturn is high frequency trading. High frequency trading is defined as computer trading programs that can execute up to 1000 trades per second! Here’s how it works. Once a lower limit is hit, and a sell order triggered, all these programs execute 1,000 trades per second to sell. This sends the market into a freefall. Until human heads finally notice and put a stop to it. This in my opinion is the only credible explanation.
In my mind this only highlights the dangers of buying and selling instruments and in ways you cannot comprehend. When markets contain so many derivatives that you require complex computer programs that are capable of executing a thousand trades per second, you’re at their mercy.
And its one more reason I prefer the OTC and Bulletin Board markets. There are no derivatives, and no automated software programs trading the market.