Especially when there are few or only one market maker, penny stocks are susceptible to price manipulation. A common and easy manipulation is for a broker-dealer to gather a large holding of a penny stock at a very low price. Through the use of high-pressure sales techniques, the sales force of the broker-dealer hypes the stock and stirs up demand, which seemingly justifies the continual rise in prices given by the broker-dealer (which is probably also the only market maker). The price continues to rise until there are no more investors who will buy, and then the bottom falls out and the price plummets. Sometimes the broker-dealer will buy back the securities at the fallen prices to recapture the stockpile for a future revival of the stock; more often investors are simply left holding the worthless stock.
-------------------- Charts are like artwork, it's the same painting to everyone but each person see's something different.
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