Stock pumping explained

The other day my mother brought a pink sheet or OTC stock to my attention saying she is considering investing and how the price of this stock is going through the roof. First I just tried to tell her this type of investment with no or very low liquidity is for suckers and experts. OTC companies have no or little financial reporting requirements. If you're dumb enough to be suckered into investing into one without verifying what is behind the claims made then it's your fault if you loose your money. On the other hand if you're an expert investor with the tools and the time to do your due dilligence and verify everything then you can find some good deals and new upcoming businesses with fine management and great products.

I was hoping that just telling her that would discourage her sufficiently to leave the idea alone and forget about it completely. As it turns out I was not so fortunate. Today I wake to get a message from her that says I should look into it again for her.

So I'm like, Okay. Let's take a second look. Here is what I see.

Most people don't see what's going on here, but some will notice the abrupt change in volume that coincides with change in price. Okay basically this situation of having no volume and then big volume and price growth on a microcap stock is the telltale sign of the stock being advertised (pumped) heavily to unsophisticated buyers that fall for the break out claims which are being made. The activity of false advertising and making phoney claims itself is illegal and regulated, but at the end of the day it's Buyer Beware!

There is another opinion on this activity that I found on the Internet, which explains what is going on and demonstrates how stocks usually collapse after the pumping is done and how the investors that got dumped to loose the value of their investments quite quickly. It's by Kaloyan Gadzhev and the article is called TagLikeMe Corp. (PINK: TAGG) Pump Finally Heats Up. He's more familiar with the actual situation than me, but it verifies my point, which is that this volume is highly pumped up.