SELLING NEAR OR AT THE HIGH IN A RUN – A THEORETICAL PLAY

[Guapo]

This post describes a theoretical play of DIAAF last Friday, 28 April 2006 when it ran from .0050 to .0070.

Please note these are my thoughts and opinions on selling near or at the high in a run. Other folks may have different ideas of how to play DIAAF in the case below.

I know this is not a real buy and sell, so we can talk theoretically till the cows come home. DIAAF’s run however, is a prime example of a one-shot play, and is a good demonstration of how to sell your shares in such a situation.

My next post on this topic will include a real play that happened yesterday, Tuesday, 02 May 2006.

Now, it is always helpful in situations like these if you have some information about the company and the stock. I normally follow anywhere from 20 to 60 stocks. By follow, I mean I subscribe to several chat sites and have email alerts set for the stocks I’m following. Anytime anybody posts about those stocks, I get an email alert so I can go view the posts.

This is a good way to keep current on information about the company and stock, and – very important in some cases – what people are thinking about the stock.

I also have price and volume alerts set in my trading software and in MedVed’s Quotetracker. Anytime any of them bump into the trading parameters I have set, usually price and volume highs and lows, I get alerts on those.

Remember, our object is to flip this one. We aren’t interested in buying DIAAF and holding long. All we want to do is sell our shares at the most opportune time.



Why Did I Think DIAAF Would Run?

What did I know about DIAAF? I have been following it for about six months now. I knew it’s made one decent run previously and a couple of small ones lately, but there was nothing to scamper home and tell Momma about.

The company claims to make biodegradable plastic wrap. That’s irrelevant for our situation but the company has been saying for months they have contracts for their plastic wrap. They have also claimed they have business contacts in China, Korea and the Caribbean. From their PR~s you can infer the company is on the verge of making money.

Therefore, investors are expecting good news from the company at any time. A better phrase would be, “Investors want good news soon.” However, the company hasn’t had any financial news in months. That is, so far, none of the company’s business has come to fruition, none that we know of anyway.

Having followed DIAAF on a couple of chat sites, I know investors are yearning for any good news at all. Lots of people have been holding DIAAF for months, waiting for information from the company about their contracts. Investors are, in a word, HUNGRY.

Now, last Friday morning several hours before the markets opened, Pennybuster.com sent out an email newsletter stating “DIAAF is on the radar”. That’s all the email message said, “DIAAF is on Pennybuster’s radar.”

Don’t hold me to this number but I believe I read somewhere where Pennybuster has something like four million subscribers to its newsletter. That’s a lot of people. Even if they only have 40,000 people, all it takes is a couple of hundred of them buying the stock to make it run some.

Now, if you have followed Pennybuster’s picks in the past, you know that frequently their stock picks will run, not always on the same day as their email newsletter but within a couple of days of it.



Key Elements of What I Knew about DIAAF

1. It’s had a couple of small runs in the last few months.
2. Investors are frustrated, waiting on confirmation of contracts and are eager, eager, eager so any news at all is likely to affect the stock.
3. Several hours before the market opened, Pennybuster announced DIAAF was on their radar.
4. Stocks in Pennybuster’s newsletters have been known to run.
5. There were no rumors or hype floating around about the company issuing any PR~s with grand news, so most likely if the stock did run, there would be nothing to sustain the elevated PPS. Chances were therefore after a run, we’d see the PPS retrace. This most likely would be a one-shot chance to flip the stock.

[Guapo]

The Play

DIAAF was sitting at .0050 without much movement at all in the last two weeks or so. Considering the key elements above, I figured it had a decent chance to run and was worth the risk to try to flip it.

I was not holding any shares so at the opening bell, so I intended to grab a few and try to flip it. The stock gapped to .0052 when it opened and moved up to .0053, and for about five minutes, it flipped-flopped back and forth between .0052 and .0053. The stock then gapped to .0056 and started running. See point A on the DIAAF chart included.

I could not buy any shares at .0053 so I decided to just watch it. The chart by the way is from MedVed’s Quotetracker. For the volume bars in the chart, yellow is the volume at the same price; that is, sales at the current price. Green is the volume where there was an increase in the PPS and red is the volume where there was a decrease in the PPS.

At point A on the chart you can see the volume jumped up at the opening. These were people like me trying to get in. Some people did, obviously.

Folks were buying from point A to point B, but you can see the initial buying spree - from point A to B, died pretty quickly, in about 15 minutes, from 9:30 to 9:45. That's an indication there wasn't that much demand for the stock at that point. That’s also an indication the PPS may soon drop also.

Note at point B, the PPS is about .0070, not a bad little run-up from the close of .0050 the day before, last Thursday.

Some folks always look for a sudden jump in the volume as an indication the PPS is going up, but a lot of times that's not the case in the pennies. Sometimes it's where people already holding the stock start dumping. This is exactly what happened right after point B. The volume is shown in red in this range, meaning the PPS was decreasing.

The dump was pretty well over at point C. It lasted about 7-8 minutes.

Folks were still buying even though the PPS fell to about .0063 at point C.

Folks continued to buy up to point D, from points C to D, and the PPS zoomed back-up to about .0070.

I believe points C to D is where folks who got the news late started jumping in, about 10AM or shortly before, or either started buying because they thought the PPS would run again. This is what caused the second run-up in the PPS I think.

You coulda probably dumped off shares you were holding fairly easily from point D on, to point F, as people continued to buy even as the PPS was declining for the second time.

At point E, the PPS took a fairly steep nose dive but people kept buying, from points E to F, probably because they thought the PPS was gonna back up for the third time.

You can see the volume drop severely from points F to G. There weren’t many trades in this time frame, relative to points A to E. Most of the people that bought in the range of D to G got stuck with the stock because it would have become difficult to sell it soon afterwards.

All the folks that bought in from points D to G and held until the close of the market ended up on the losing end of the stick – down for the day since the PPS never recovered from point D.

DIAAF made two runs. Generally pennies will make only one. To insure your profit, ”Sell the first time the stock runs.”

In this case, have your order ready and when you see that first drop in the volume, point S - for SELL, SELL, SELL - execute your order pronto!

Ah, but your comment is, “But I coulda sold in the 2nd run.” Yeah, but you didn’t know yet, during the first run, that there would be a second run, did you?

If the stock hadn’t run again, there woulda been no second opportunity to sell for a profit, at least not a good one, near .0070. This is what happened to people buying in at point D or later. They did not get a chance to sell at a profit.

The procedure above is exactly what I would have done if I coulda gotten shares when the market opened. I woulda had my sell order ready and executed it at point S. It woulda been a quick play too, in and out in no more than 15 minutes. - The End.

[Guapo]

SELLING NEAR OR AT THE HIGH IN A RUN – A REAL LIFE PLAY

This post describes a real life play of WNMI Tuesday of this week, 02 May 2006 when it ran from .0009 to .0015.

There are two other documents accompanying this one, the Price/Volume chart and the Times & Sales Table for WNMI. Both of these are found at the end of this document. Both are extracted from Medved’s QuoteTracker Program. It might help to print them so you can refer to them while reading this article.

Please note these are my thoughts and opinions on selling near or at the high in a run. Other folks may have different ideas of how they would have played WNMI in the case below.

Before we get into the analysis of WNMI’s run or mini-run really, Steeledge, on page 6 in this thread, post #53, made the point that “… Some of the observations and strategies that were discussed apply best to stocks <.05.”

Steeledge is absolutely correct. Most of the stocks I play are under .05 PPS and just about all my posts on HSM relate to those stocks. I haven’t made that clear before so I want to do so now.

Anytime you move into the higher-priced stocks, the play can be different. GTE is a good example. The stock averaged around $2 a share last year. It doesn’t usually make hard runs though it’s had a couple of good ones, but instead channels a lot. It moves up and down slowly most days so any play with GTE would be very different from a sub-penny running. I recommend you read Steelege’s post and my reply to him, post #56, on the page.

Now, it is always helpful in situations like these if you have some information about the company and the stock. I normally follow anywhere from 20 to 60 stocks. By follow, I mean I subscribe to several chat sites and have email alerts set for the stocks I’m following. Anytime anybody posts about those stocks, I get an email alert so I can go view the posts.

This is a good way to keep current on information about the company and stock, and – very important in some cases – what people are thinking about the stock.

I also have price and volume alerts set in my trading software and in MedVed’s QuoteTracker. Anytime any of them bump into the trading parameters I have set, usually price and volume highs and lows, I get alerts on those.

Note: There is also a thread on MedVed’s QuoteTracker in this Forum if you want to learn more about it.

Remember, my object is to flip this one. I’m not interested in buying WNMI and holding long. All we want to do is sell my shares at the most opportune time and make whatever profit I can.


Why Did I Know WNMI?

I’ve been following and playing WNMI for about two years. I had been playing it when it took a nose dive in 2004, falling from .024 or so all the way to under .0010. Lots of folks took a huge bath on it then.

I don’t remember the exact sequence of events but the company failed to make the deadline for its SEC filings and was booted back to the pinks. That didn’t help either.

Once it dropped below .0010, sometimes sinking as low as .0004, it would occasionally get active and move up a little. It would then decline again to .0008-.0004 and settle into its old routine of bouncing around in that area. If memory serves me correctly, at no time did any of the mini-runs exceed .0018.

WNMI, after its crash, did not have much of its reputation remaining. Most folks were disgusted with it and moved on. Few people were paying attention to it after its crash.

The company did not issue many PR~s, and generally when the stock got active and made one of its mini-runs, it was due to rumors about possible news coming out.

Several weeks ago, the talk increased on the boards. WNMI hadn’t made a mini-run in a couple of months. There were increasing rumors of news coming out, specifically that the company make catch-up on all their filings and make it back to the OTCBB.

Considering the factors above, I picked-up 500,000 shares at .0008 just in case, and set an alert in QuoteTracker at .0011.

[Guapo]

The Play

About two weeks ago, some talk about TA for WNMI popped up. There were people claiming A Golden Cross for WNMI soon. In this particular case, the 50 day moving average line would cross and move above the 200 day moving average line. The actual point where this happens is called The Golden Cross. TA folks see this as a bullish trend for the stock, predicting a rising PPS.

Note: You will see the 50-day and 200-day moving average acronyms expressed several ways. Some of the more common ones are: 50SMA, 200SMA, MA(50), MA(200), 50-Day SMA, 200-day SMA.

Now I don’t want to get into a detailed discussion of TA or a debate. I will say however they aren’t my forte, because I don’t believe TA in-and-of itself, predicts anything for the future.

Having said that, I admit that TA sometimes works but not for the reasons you might guess. TA, IMO sometimes helps because there are a lot of folks dedicated to it. They use it to help make buying and selling decisions. If enough people for example see a golden cross, believe the PPS is going to increase, act on that belief and buy the stock, the price will indeed rise. It becomes a self-fulfilling prophecy.

So I had been watching WNMI for the past two weeks. It bounced up and down for a while but never moved higher than .0011. As time passed, the talk on some of the chat sites about the golden cross increased.

Tuesday morning WNMI opened at .0009 and bumped along with little activity, moving up a tick to .0010, back down to .0009 and back up to .0010 about 12:45PM, point A on the chart.

About 1:02PM, there was a transaction at .0010. Fifty-eight minutes passed before there was another. Then about 2PM, point B on the chart, the alert I had set at .0011 sounded. Ah, we got a nibble!

For roughly a minute and a half, the PPS bounced between .0011 and .0012. I prepared my sell order.

At 2:02:19PM the PPS moved to .0013. See the time on the chart. Between 2:02:19PM and 2:02:55PM, there were six orders at .0013 processed.

Just when I saw the volume drop I guessed .0013 was gonna be the high, so I submitted my order, point F on the chart. That was about 2:02.44PM. In a minute and 15 seconds, my order was filled at 2:03:57, point G on the chart.

Four minutes went by with the PPS remaining at .0013. Then it jumped to .0014 at 2:07:18 and then two minutes later at 2:09:38, to .0015.

If I had waited, could I have sold my shares at .0014 or .0015 at these times? I think I could have at .0014. However, .0015 may have been difficult because there were only 4 transactions at .0015 and two of them were small.

By 2:18:50PM, Point C on the chart, the run was over. Notice the volume drops very low here.

Look at points D and E on the chart the chart. Point D is a 100,000-share transaction. Point E is 212-share transaction. Could I have dumped off my shares at .0015 at these points? I doubt it.

From point C on, even though the volume dropped very low, there were times before the market closed where it appeared I could have sold my shares for .0014. Refer to the Time & Sales Table.

You might ask why I didn’t wait longer to sell my shares and go for a sale at .0014. Remember I was just trying to flip this one and get any profit I can. Also, as discussed above, I didn’t think WNMI was going to run hard, that is move very high. It hasn’t had a history of doing that.

There were six orders initially processed at .0013. I saw the volume drop low – point F. It did not appear at that time the stock would move any higher.

I was holding 500,000 shares I had purchased at .0008. At .0013, my profit before commissions was $250. If I had sold at .0014, my profit before commissions would have been $300.

I was fairly certain when I submitted my order that I could sell my shares at .0013. I did not know at the time the PPS would move to .0014. So was it worth waiting, and risking a 250-dollar profit in hopes of making an extra $50? It wasn’t for me.

Therefore, making a sale at .0013 looked pretty much like a sure thing. A sale at .0014 was iffy but probable, especially if I had waited later in the day. A sale at .0015 looks highly unlikely.

Both the sales at .0014 and .0015 are hindsight of course, since I had sold my shares at .0013 previously to the stock moving to .0014.

[Guapo]

Observations

1. There were about 68 total orders processed for the day, with 34 of them during the run, from 2:02:19PM to 2:18:50. The run lasted about 16 and ½ minutes.

2. You will note during the day there was never a large sell-off. This was not a pump and dump. The discussion about the golden cross may have influenced some people to buy the stock however but with only 68 orders during the day, there wasn’t a lot of activity, even with the run.

3. Note you don’t see any red volume bars in the volume section of the chart. That shows that hardly anyone was selling. What is indicated is a few folks were quietly accumulating the stock, anticipating a harder run soon. This may be linked to those folks that believe the golden cross predicts a higher PPS on the horizon. It may also have something to do with the rumors floating around the company may actually file financial reports with the SEC soon.

4. This run happened last Tuesday, 02 May 2006. WNMI didn’t run again the rest of the week, but it did move up to .0015 and remain there a while. I won’t include those charts but they appear to show accumulation continuing.

5. The low number of trades demonstrates that not many folks are following WNMI. It’s off the radar for most folks. If it does run soon, it will catch most people off-guard. If there is a run, what I anticipate happening is a PR issued by the company with some kind of good news. Those folks that get the news early will jump-start the run. As the news spreads, more people might come on board and help continue the run. If this happens, WNMI could experience a good run, probably its best in the last two years. Do I know this will happen? No, I’m merely speculating. There are no hard indications WNMI will run again soon or move to a higher PPS, other than the golden cross folks.



Some Last Thoughts

As you have surmised, my method of determining when to sell in a run is very simple. Often it’s hit and miss. Predicting the highs of a penny stock in a run is akin to predicting the future.

As I’ve written before, I set profit limits and sell when I have a 30% or 50% profit for example, but that’s just to guarantee I make some profit. Limits like these do nothing to help you maximize your profits.

So the burning question is, “Are there better methods than mine to ascertain when to sell your shares when a penny is running? If I had a nickel for every hour I've pondered that question and looked for better techniques, I’d be a millionaire already, and wouldn’t have to worry about the stock market anymore.

In short, I don’t know of any better methods than the one I’m using now. Since I can not predict the end of runs with any accuracy, I use the profit limits to insure I make some profit.

Some folks use TA to help them determine exit points. You may find TA helps you. You should at least take a look at TA. Often times the difficult part is not determining when to sell but pulling the trigger. TA may at least help you to make the decision to submit your sell order.

To summarize, the best method that works for me is to know the stock as well as I can, be aware of how the PPS has behaved in the past, and what it’s capable of doing in the future. If a PR causes the PPS to run, I quickly try to determine the impact it will have on the PPS. That’s often difficult because you don’t know how other people will interpret and react to PR~s. You have to do the best you can though.

Then I watch the run, observing the chart and go from there. If you have a better method, I’d sure like to hear about it!

I posted previously in this thread about DIAAF, “Selling Near Or At The Top Of A Run - A Theoretical Play”. I wasn’t in that one but it appeared to a one-shot run. The way I would have played it would have been correct.

I played WNMI pretty well too. I might have been able to increase my profits another $50 by taking a chance, waiting and trying to sell at .0014, but a $250 profit is nothing to sneeze at for less than ten minutes work.

In a couple of days I will post another article entitled, “Observations on INSQ’s run 05 May 2006”. I would have played INSQ’s run incorrectly.

GLTA with your trading!

[Guapo]

Information On Stock Patrol Part 1

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Part 1 of 5 Parts

I got into a discussion about Stockpatrol.com in the VNBL thread, page 3. I moved it to this thread since it's not directly related to VNBL.

For those of you that don't know, Stock Patrol, www.stockpatrol.com, is a web site that investigates penny stock companies. It provides the reports on the Stock Patrol web site.

Hartley Bernstein is the owner and publisher of Stock Patrol. In the mid-1990~s, he was a Wall Street Attorney. As a result of his own shenanigans with his clients in the penny stock market, he was apprehended, pled guilty and agreed to testify against other defendants to avoid going to prison. He received a two-year suspended sentence, lost his license to practice law and had to forfeit $850,000 in illegal profits.

Afterwards he started Stock Patrol. Mr. Bernstein has been on both sides of the street. He was a major player in the penny stock market in the 1990~s. He is well aware of how the game is played, having participated in it as one of the big boys before his apprehension. He, of all people, should recognize potential stock scams.

Is Mr. Bernstein operating Stock Patrol for his own benefit to continue to make money by bashing penny stocks? The proof is in the pudding. I'll give you one example.

Stock Patrol was reporting on CMKX, claiming it was shady a year before anyone else had the temerity to do so. Last year, CMKX was de-registered by the SEC and is no longer in business. Investors in CMKX have lost millions of dollars.

Stock Patrol reports on many companies it thinks may not be playing by the rules. These companies are not lining-up to sue Stock Patrol. I wonder why that is? Perhaps Stock Patrol is telling the truth? The reader can decide for himself.

[Guapo]

Below is an article about Mr. Bernstein. The URL is provided first, then the article itself. At the end of the article are two more URL~s if anyone is interested in additional reading.

Guapo

http://www.rgm.com/articles/nytimes2.html

Penny-Stock Fraud, From Both Sides Now

By Diana B. Henriques
New York Times
February 16, 2003

Hartley T. Bernstein spends his days exploring the piranha-infested shoals of the penny-stock market, where cheap, thinly traded stocks can be rigged to generate enormous profits for insiders.

In a spare bedroom of his eight-room Georgian-style apartment on Park Avenue in Manhattan, he searches the Internet for clusters of seemingly unrelated companies that use the same obscure accountants, lawyers and underwriters, and share the same mysterious offshore investors. He looks for flaws, fibs and fantasies in corporate documents — like one company's plan to sell stock and use it to take over AOL Time Warner, AT&T, General Electric and, for good measure, General Motors. Then Mr. Bernstein posts his conclusions on StockPatrol.com, his Web site, to warn investors away.

Some of his most faithful readers are market regulators. Following his road maps, federal investigators have found and shut down frauds they might have missed. Occasionally, he tips regulators in advance, before his targets realize that he is on their trail. One prosecutor called his assistance "singular."

His cooperation has helped the government build criminal cases against at least 34 people.

Mr. Bernstein is so good at what he calls "connecting the dots" of complicated penny-stock frauds for one good reason: five years ago, he was a formidable dot himself.

Through his law firm, Bernstein & Wasserman, he worked for some of the most notorious penny-stock manipulators of the past two decades: Stratton Oakmont, Biltmore Securities and Sterling Foster. He also worked for a host of forgettable little companies whose stocks those firms manipulated.

But in reality, he worked for Randolph Pace — a wily Wall Street veteran who, with Meyer Blinder and Robert E. Brennan, make up what one lawyer has called "the three tenors of the penny-stock world." (Mr. Blinder was jailed for securities fraud in 1992, after the collapse of his firm, Blinder, Robinson & Company. Mr. Brennan, the smiling force behind the equally infamous First Jersey Securities, is serving a nine-year prison term after being convicted of fraud in 2001.)

[Guapo]

What makes Mr. Bernstein's apparent turnaround remarkable is its rarity. Recidivism is so common in the penny-stock world that some law enforcement experts are instinctively skeptical of anyone who claims to have left its temptations behind.

But several prosecutors and regulators have been persuaded by Mr. Bernstein, a small, dark, boyish-looking man of 51 who began to cooperate with the government in the fall of 1998. He spent hundreds of hours coaching investigators on how to decipher Mr. Pace's complex deals. He confirmed information from other sources and "gave the government sufficient confidence" to seek an indictment against Mr. Pace in November 1998, one prosecutor said.

The government later expanded its case to include two additional penny-stock firms and several new defendants. Mr. Bernstein also provided background information about Stratton Oakmont's deals with the shoe designer Steve Madden, who pleaded guilty to fraud and money laundering in 2001 and was sentenced last spring to 41 months in prison.

In May 1999, Mr. Bernstein, too, pleaded guilty to securities fraud, conspiracy and perjury and agreed to forfeit $850,000 in illegal profits. He prepared to testify when Mr. Pace came to trial on charges of secretly controlling Sterling Foster and prospering from its roughly $200 million in fraudulent business. That did not become necessary. Mr. Pace pleaded guilty in 2000 and last April and was ordered to pay nearly $135 million in restitution to investors and was sentenced to eight years and four months in prison.

By the time Mr. Bernstein pleaded guilty, his career was in ruins. He had been disbarred. His law partners had walked out on him. He could not seek a new job while he faced prison, but he was desperate to keep busy.

In July 1999, after carefully sounding out his own lawyer and the government, he started StockPatrol, which he saw as a logical extension of the guidance he had been providing to investigators. He began by scanning hyberbolic chat groups and e-mail messages on the Internet for the latest hot penny-stock tip. Then he would scour the touted company's public paperwork, looking for red flags.

The found them — and regulators paid swift attention. Following are a few examples:

On Jan. 31, 2000, he published the first of several articles questioning whether Wellness Universe, a small health services company, was really the target of a $1 billion takeover bid, as it claimed. Eleven days after the first article, regulators halted trading in the shares, and three months later, the company's founder, George Pappas, was indicted in Manhattan. In January 2001, Mr. Pappas pleaded guilty to charges that he concocted a phony takeover to drive up the stock price so he and his family could sell for a quick profit of $2.3 million. He is awaiting sentencing.

On March 4, 2001, Mr. Bernstein advised regulators that he would be running an article the next day about the Ives Health Company, a little Oklahoma concern that claimed to have a new AIDS drug. On the next day, regulators halted trading and, a month later, the company and its founder, M. Keith Ives, were indicted in Manhattan on federal conspiracy and wire fraud charges. Mr. Ives denies the charges and is scheduled for trial in June.

In September 2002, Mr. Bernstein questioned the growth prospects claimed by the Vector Holdings Corporation, whose primary business was a stuffed-potato booth at a Florida shopping mall. A month later, the Securities and Exchange Commission accused the company, its president and its transfer agent of violating securities laws — in part for not disclosing that the president, Allen E. Weintraub, had a criminal record. Mr. Weintraub and the companies have settled the cases without admitting wrongdoing, but the penalties have yet to be determined.

[Guapo]

When Mr. Bernstein came before Judge Loretta A. Preska in Federal District Court in Manhattan for sentencing in June, the many letters submitted on his behalf included one from Cameron K. Funkhouser, a vice president of the NASD's regulatory arm. Speaking only for himself, Mr. Funkhouser cited his "very positive relationship" with Mr. Bernstein, adding, "My office has opened several successful cases" based on his leads.

Richard D. Owens, the assistant United States attorney who prosecuted Mr. Bernstein, also cited StockPatrol at the hearing, but added that when Mr. Bernstein first came to the government, "we, of course, raised our eyebrows a bit."

And no wonder. Mr. Owens knew that operating a "fraud detection" site is hardly an untainted concept. One notable effort, StockDetective.com, foundered two years ago after its parent company was found by federal prosecutors to have been the target of a stock manipulation scheme. And in May, a stock adviser, Amr Ibrahim Elgindy — whose Web sites, insidetruth.com and anthonypacific.com, promised to expose penny-stock schemes — was indicted in Brooklyn on federal charges of operating a stock manipulation and extortion racket. He denies the charges and is scheduled for trial in June.

But Mr. Owens told Judge Preska that he was impressed by Mr. Bernstein's effort. "Whatever doubts we had about his motives or his purposes or his intents have quickly fallen away," he said.

Judge Preska added her own endorsement. "You have used your time and your talent in a way to help investors avoid just the sorts of things that you had previously used your time and talents to impose," she said. "I applaud you for your work." She sentenced him to two years' probation.

His quiet days running StockPatrol bear almost no resemblance to his life as an adviser to Mr. Pace's raucous empire. Like Mr. Blinder and Mr. Brennan, Mr. Pace was an intelligent, urbane, charming rogue. He survived many regulatory cases over the years and continued to prosper even after his firm, Rooney Pace, was expelled from the securities industry in 1988.

By then, Mr. Pace's business was thoroughly intertwined with Mr. Bernstein's law practice. After graduating from Columbia and the New York University Law School, Mr. Bernstein worked at two midsize firms in Manhattan and spent a few idealistic years on the city's special narcotics prosecution squad. But in 1982, at the age of 30 — "just young enough not to be afraid," he said — he set up on his own. A lawyer he knew had become general counsel for Rooney Pace and had tossed a bit of business to the eager Mr. Bernstein.

By the mid-1980's, Rooney Pace was nearly a quarter of his growing firm's business. Did Mr. Pace's reputation worry him? "I did not really see the penny-stock world as separate from the real world," he said. "I had customers who had problems with Shearson brokers or Merrill Lynch brokers that cost them far more money than some of my cases for Rooney Pace involved."

[Guapo]

Even after Rooney Pace closed in late 1987, Mr. Pace's friends hired Mr. Bernstein. As the 1990's opened, Bernstein & Wasserman was growing like a weed.

Those were lavish, lunatic days. Mr. Pace and his friends "lived to party," Mr. Bernstein recalled.

"They had `boys' nights out' that would go on for weeks," he added.

There were binges at elegant restaurants, junkets to lush resorts, shopping sprees at Armani, recuperative weeks at some palm-studded spa.

Occasionally, Mr. Bernstein and his wife, Debra L. Cherney, were invited along. One New Year's Eve, they joined the Paces and three other couples for a Broadway show and dinner at Nobu, a top Manhattan restaurant. Another day, Mr. Bernstein was suddenly invited to join Mr. Pace's entourage for a private-jet excursion to Atlantic City.

Through it all, Mr. Bernstein said, he still thought of himself as an ethical person who just happened to represent "a bunch of people who were scoundrels." He concedes, "My business was so completely dependent on this group of clients — I was blinded by that."

Joel M. Cohen, a former federal prosecutor who worked on cases involving Stratton Oakmont, recalls his frustration with Mr. Bernstein's myopia. "Hartley was described by insiders as a `player,' somebody who, in one way or another, understood the game, knew the rules and went along with them," he said. "He was living in denial; he really was."

Even when government pressure forced Sterling Foster to close in 1997, Mr. Bernstein still felt immune. "My impression, looking back, is that Randy Pace tried to keep me at arm's length from anything that was actually unlawful," he said, almost wistfully.

But closing one eye to Mr. Pace's unsavory past clearly affected Mr. Bernstein's depth perception. He invested in several fraudulent deals and lied about those deals to regulators. He had crossed the line.

One afternoon in September 1997, he learned that several of Mr. Pace's friends were striking deals with prosecutors and talking — about him. Shocked and frightened, he hired a lawyer, Scott A. Edelman of Milbank, Tweed, Hadley & McCloy.

Looking back now, his days in the Pace empire seem to him to have occurred a lifetime ago — one specific lifetime ago: that of his daughter, Raine. She was born on Dec. 17, 1997, shortly after her father came under investigation, and died on June 3, 2001, of what is believed to have been an asthma-related seizure.

"When all this happened with Hartley, we thought it was the end of the world," mused his wife, herself a lawyer, the family breadwinner and a loyal defender of her husband's essential decency. "But I remember thinking that day: I thought I had problems — I didn't know what a real problem was."

They are both active in bereavement support groups and still hope for a family. Mr. Bernstein, meanwhile, says he is exploring ways to turn StockPatrol into a profitable, but still lawful, venture — perhaps by expanding it into a radio program or a book.

His admirers among the enemies of penny-stock fraud say they are confident that Mr. Bernstein's redemption is genuine and that he will resist future temptations. But even they cannot explain why he can see so clearly now what he could not see for so long: the dots that add up to fraud.


Additional URL~s:

http://www.csoonline.com/read/050103...ing_stock.html

http://www.careerjournaleurope.com/c...-movingon.html

[MathewBracken]

Just as with any other stocks, penny stocks are also listed. There are two types of listings for penny stocks. Over the counter lists are lists of stocks that are not listed on major stock exchanges because they do not usually meet the minimum requirements to be listed.

hototc.com

[PriyaJain]

P&D of the OTCBB is no worse than the pump and dump in any other market. In fact, it might not be as bad. Plenty of money to be made with penny stocks and with no more risk than any other market. In fact, the risk now days is probably less less. More money has been lost investing/trading in the traditional markets that will ever be lost in the OTCBB. Savvy traders will agree. The rest of you dolts will spew the party line.