Mind the gap

May 14th, 2010 – Comment

As far as your question of pumping and dumping in the stock I can’t say but its clear that there are a number of other issues that need to be recognized and managed if you are going to hunt in this gap.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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pharmagap

Lou,

I don’t know if you can explain this one to me but I am quite mystified.

PharmaGap came out with a press release that confirms the drug candidate they have kills 100% of prostate cancer cells etc… In short a fabulous press release…

http://www.theglobeandmail.com/globe-investor/news-sources/?date=20100513&archive=ccnm&slug=607241_1

On the news 13,000,000 plus shares of 78,000,000 total shares have traded so far today and the stock goes down! I can’t believe it. Does that mean this is a scam? Pump and dump deal?

Insights would help.

Dan

 

Hi Dan,

There are so many reasons for the shares of PharmaGap Inc. (GAP TSXV) would sell off after the release of news regarding the tests conducted by the National Cancer Institute  (NCI) in the United States. The primary reason is the concept of feeding the ducks when they are quaking.

 

When buyers are bound and determined to buy the stock and the stock doubles in a few days and you happen to own some of the shares it is in your best interest to sell and take a profit. In three days GAP traded from a low of $0.14 to a high of $0.30. If you capture some of those gains it can pay for something if not for everything.

 

gap3

The two year chart shows a rather choppy trading pattern for GAP suggesting that you have to trade this stock for income instead of holding out for a long sustained advance.

 

 

 

 

gap4

The RSI on the six month chart provides indications that GAP was overbought and likely to see some selling coming into the market. Yesterday the stock opened at $0.30 and then gave up lots of ground by the time the session ended.

 

Other reasons to explain the selling on the news out of the NCI was that the test mentioned in the press release is not part of a clinical trial. The fact that GAP’s lead compound GAP 107B8 had an effect on a panel of cancers does not in anyway confirm that it will be safe to consume in the dosage used in the test or that it will effective when ingested by patients.

Another factor to consider is the Market Cap of Gap. At $9.8M it is a microcap stock which by its very nature adds a significant level of risk to the investment. As far as your question of pumping and dumping in the stock I can’t say but its clear that there are a number of other issues that need to be recognized and managed if you are going to hunt in this gap.

 

MAKE IT A HUGE MAY AND HAPPY CAPITALISM!

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