HELP!!! Need Answers On Reverse Split!!!!?

Question

This is a sad story for me but better for others. 4 of us started to play Penny Stocks for fun. I found a Penny Stock at .0008 so I openned a account on ETRADE. Come to find out that I couldn't buy Penny Stock for 7 Bussiness days.To make a long story short this stock went from .0008 to .013 in a matter of 2 days. At $1000.00 I lost out and they are rolling in the cash. We've heard through ETRADE and Fidelity they MAY annouce a Reverse Split on Wed. of this week. How will that effect this stock will people bail ? Price drop? or cause people to invest more.Should I buy Monday or wait until after reverse split? Its a small one 20-1? Please help me I will give you the ticker symbol so you can research. I'm so confused .Really want to learn as much as I can about market!!!!! Really exciting, well for them they are just over whelmed!! They say the other 3 Buy IN I say stay out what do I do?

Answer 1

Research the stock and then decide what to do.  The Split should not really effect the stock price.  The total stated capital will remain the same.  The only difference is the stock will be trading @ .20/share rather than .01/share.  the holders of share before the split will see there number of shares drop by a factor of 20.  I've seen this a lot of times with penny stocks.   It's a way that the promoters make the stock look like it's moving more than it really is.   They have a stock that is around 0.01 or less.  The promoter receives a couple 100 thousand shares of the stock for consulting services.  The promoter then starts talking up the stock and recommends other ways to make the shares appear more interesting.  After the split the stock usually just drops back down to the underline value of the company.

I agree with you and recommend you stay out.

BTW, Does there appear to be ANY reason for the jump in price ?  New report, announcements ?  If not this may be a pump and jump job.  Watch out.

Answer 2

that means that for every 20 shares you own you will get 1.

this means the price should go up accordingly. another words if you have a 100 shares to start out with at say .01 a piece you will end up with 5 at .20 a piece.  as you see 100@.01= 1.00

as does 5@.20= 1.00. the price went up but the number of shares you own went down.

Answer 3

Reverse splits are usually an indication of things getting worse.

You failed to mention the volume this stock trades daily. Is it liquid?  I wouldn't trade a stock with less than 400,000 daily shares traded on a stock more than $5. I'd look for considerably more before even entering this trade.

Your approach to trading penny stocks sounds more like gambling than trading.

You should read some basic books on trading. After that move up to;

Trading In The Zone, Mark Douglas

Mastering The trade, John Carter

(I read a new trading book every 8 weeks or less).

Here's some web sites to learn more (although they may be more advanced for you, right now);

http://www.alphatrends.net/

http://www.tradingwithtk.com/

http://www.thekirkreport.com/

http://www.optionaddict.net/

http://www.slopeofhope.com/

BTW: Always have an exit plan before you take a position.

You might want to know that the typical biggest mistake of new investors is to trade penny stocks. #2 mistake is taking tips from TV, radio, friends, relatives, the web & strangers.

Answer 4

Reverse splits are hazarous for your health.