It's time to get out of Medical Marijuana (OTCPK:MJNA). Well, actually the time to get out was when the stock traded over $0.30, and I was pounding the table to get out. There is still plenty of downside left in this stock though, and I believe that the shares will be trading in the $0.02 - $0.05 range within the next couple of months, if not sooner. This is a penny stock that was pumped up based on a misleading "earnings report", and what you are seeing now is an orderly march to the exits. Whenever this stock pops - I repeat whenever it goes up - sell into strength before it's too late. Do not get greedy, do not "hope that it pulls a Medbox", just sell.
The Pumpers Try To Fool You
With a stock like this with questionable financials and management, you need to go underground for almost all discussions/analysis of the stock. This means messageboards such as the Yahoo! (NASDAQ:YHOO) boards, InvestorsHub, and the like. Here is a very simple trick that you should use to know when to sell/short the name: whenever the "pumpers" are out in full force, they usually show up when the stock is on the upswing. Why? Because these are generally low float names that could easily be moved by retail investors, and when the stock is up, the "pumpers" are actually selling shares to you! That's right, they want to keep people buying and buying so that they can hit the "sell" button without attracting too much attention.
Experienced pumpers & dumpers generally don't want to attract attention by, say, selling a block of 1,000,000 shares in one order, so they will cleverly sell in many small-ish blocks in order to avoid suspicion. You need plenty of retail buyers putting their "gambling" money on this stock to successfully sell a huge batch of shares into strength for a stock like this, and the pumpers succeed gloriously.
Of course, once they're done selling (or likely going short), they will either quietly disappear, or they will reappear as "bashers" after they have taken short positions. Yes, your former "pumping" friends are now hiding behind different aliases bashing - the guys and gals who run these pump & dump schemes know that there is always money to be made from both sides of the trade.
This is why most retail investors should stick to ETFs or liquid larger capitalization stocks - to avoid being victims of these schemes. I know it's every person's dream to "hit it big" in the stock market with penny stocks, but just like in a casino, the house always wins.
I will now show you an example of such a "pumper" from the InvestorsHub boards.
So, here is a post on May 16, from one of the InvestorsHub's largest MJNA long. If you look at this individual's post history, you will see all kinds of posts claiming that this individual has made "millions", that "$0.25 will hold and $0.50 is coming", and many more large claims:
Of course, people who have seen this all too often know that this individual was probably out of the majority of his/her position a long time ago, and when it becomes clear that this cow is milked, they will make one final post claiming that they sold "most", but still own shares and expect them to go to the moon...someday. Here's an example:
Oh, would you look at that? Now this individual claims that he/she "knew" defeat was here at $0.25 and that he's been essentially perfectly swing trading the stock. But, but he's claiming he also bought "higher" and is just "preventing losses" and is now moving on to pump...erm, I mean, "invest" in other stocks such as Tranzbyte Corp (OTCPK:ERBB), Fannie Mae (OTCQB:FNMA), and Advanced Micro Devices (NASDAQ:AMD). No. This person was very likely selling to the shareholders the whole time, and now shamelessly walks away with $1.5M. And there's nothing you can do about it. Poof - there goes your money.
Get Out Now
I use my real name, Seeking Alpha knows where I live, and I am a public enough figure that if I were secretly "shorting" or otherwise trying to "manipulate" the stock, then the SEC would be all over me like white on rice. While many of the pumpers - the majority of whom care only about themselves - get rich off of these sorts of schemes, I am proud to say that I am neither a pumper nor a dumper. I have never owned shares of MJNA, I have never shorted shares of MJNA, I have never been asked to write about MJNA, and I am affiliated with nobody who would stand to gain from the stock going down (or up).
But I do care about my readers, and I want you to sell into strength as heavily as possible before it's too late. This is not something to invest in, and the "story" behind the company was either spun by a pump & dump group, or perhaps even by the company itself because it keeps issuing shares. The retail investor will say, "oh, but they need to keep selling share because Marijuana is illegal", but this is utter baloney. The insiders are very likely paying their salaries with money they got from selling infinite shares to the retail investor, and they will continue to do so for as long as this equity remains at these elevated levels.
Disclosure: I am long AMD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: No position in MJNA.PK