Huge trading activity and almost nothing to justify it – this is the Bonanza Oil&Gas Inc. (PINK:BGOI) this week. This is one more player on the oil market, enjoying the crisis that originated from the turmoils in Egypt. What you are offered is huge activity in forums, and very little factual information. There are, however, a few facts that go counter to the excitement and should be considered.
Now, Bonanza did a pretty good run in January. This is still a sub-penny stock, but there was a 100% increase in a matter of several days, when the price almost tripled going to $0.0021 per share. Naturally, the effect of promotions was short-lived, and a sharp decrease followed. At least, there was an objective reason for this development back then. This week, it seems that rumours are taking advantage over facts.
This week, the increase is again above 100%, as the volume yesterday even surpassed 130 million shares. And if you are one of the people wondering why – you are rightfully doing so. The important question is – what could do have the effect that a paid promotion could not achieve. The simple answer is – rumours. Enormous amount of rumours over the Internet about a company you can hardly find news about, with limited financial information and hardly anything to inspire confidence in investors.
Investing in Bonanza resembles a bit like walking through a mine field. Obviously, at the end of the field there is something of value, the same way investors pray on the stock escaping the sub-penny levels. The thing is, the regular investor is walking through this field in a dark night, wearing dark shades. And you guessed it – one wrong step and your foot is missing. [BANNER]
All in all, it is a high risk to take, even though profits are also possible. And if you are thinking of the common practice which says buy on rumours, sell on news, remember that it only works when companies actually do release news.
