Another day, another penny stock pump crashing to the ground.
This week my DMs are overflowing with questions from students about Labor Smart Inc. (OTC: LTNC) stock.
In late March, LTNC went from 3 cents to 8 cents — 166% in SIX DAYS!
But like all penny stock pumps, it was only a matter of time before the share price cratered back to oblivion.
This is why knowing your history is important … 99.9% of penny stock companies fail.
If you know what to look for, the pattern is always the same.
But why do all penny stock pumps fail?
Because social media hype around penny stocks exists for one reason only: to push the price higher. That gives someone else the opportunity to sell and take fat profits. And if you fall for the hype and buy in, that’s your money.
This is why I teach my students to always sell into strength … but more on that later.
This brings us to today … when LTNC is down 11%, and 51% just this week.
I warned my followers about this in March, and the predictable stock promoters came after me. Check out the tweet below …
LTNC is a perfect example of why you should learn to RIDE the hype … but NEVER BELIEVE the hype.
And in this case … the hype is EXTREME.
This company has an entire legion of FinTwit promoters who call themselves the #LTNCArmy (even the CEO Joe Pavlik regularly uses the hashtag.)
These hold-and-hopers will do anything to pump the stock, even now that it’s down 85% from its recent highs.
But don’t get me wrong — I actually like promoters because they create volatility.
Without volatility, the penny stocks I trade wouldn’t see such parabolic moves to the upside.
They’re doing me a favor and they don’t even realize it.
I don’t want them to stop. But I do want my students to be aware of the pattern. And now I see it again in LTNC.
Let’s look at what’s going on with this company and see what traders can learn from another penny stock collapse.
Strap in. This one’s a doozy.
Table of Contents
You may be wondering what Labor Smart Inc. is…
Labor Smart Inc. is a temp agency that recently acquired a company called Takeover Industries Inc.
Takeover Industries is the producer of a brand of hydrogen water drinks called NXT LVL.
But why is LTNC stock getting destroyed over the past two days?
Look no further than this lawsuit filed by Takeover against Stanley Barsch (better known as @StanTheTradingMan on Twitter.)
The complaint alleges that Barsch, a penny stock promoter who was a cop just three years ago, secured a position as a “stock market advisor” at the company … and then continued to trade the stock.
The complaint further alleges that, as soon as he realized the company was trying to build actual products and not artificially pump their share price, Barsch contacted Danny Day. Day invented part of the technology used to create the company’s beverages. Barsch allegedly asked if Day had “thought about taking his company public.”
To the layperson, this may sound very sketchy.
What’s worse, if the allegations are true, it shows that Barsch’s intentions were always about making money for himself and never about helping the company he was “advising.”
Be careful about what you see on Twitter and on social media … I’ve seen many promoters come and go over my 20+ years of trading.
The keyword being ‘go’. They never last long and usually leave their followers holding the bag.
Case in point, @StanTheTradingMan’s Twitter account was mysteriously deleted this week.
What a shocker!
This is exactly why I constantly preach the importance of transparency. And it’s the same reason I post every single trade I make on Profit.ly.*
Say it with me: transparency. It’s one of my favorite words.
If you’re going to trust any self-proclaimed “stock market advisor,” first do your research and make sure that they’re transparent with every trade.
Every day I see traders fall for smooth-talking promoters without having any idea what these guys are up to behind the scenes.
You can be smarter than that. Don’t fall for anything that sounds too good to be true. Never take anyone in this niche at face value.
First, grow your knowledge account, then grow your trading account. You can start with my “Pennystocking Framework” DVD (the pattern still works, even 10 years after I recorded it.) It covers the complete 7-step framework my students and I still use to trade today.
Now, let’s talk about a key lesson students can take away from the LTNC saga.
I say this often, and it bears repeating…
Ride the hype but never believe it.
What do I mean?
Let’s say a penny stock has a big green day — with a perfectly-timed tweet or press release. Then promoters rush to social media to hype this incredible company and new investment opportunity.
I’ll let you in on a little secret: it’s not an amazing investment opportunity and the promoters have no clue what they’re talking about.
Sometimes they don’t even know what the company does.
That being said, if you’re new to trading, it can be tempting to get swept up in the hype train. You can see it on Twitter, chat rooms like Discord, and all over social media.
Don’t fall for it!
If you hop aboard the hype train and believe that any of these Twitter pumps are more than just crap penny stocks — you can end up with worthless stock and big losses.
And deep down, your trading instinct will likely be screaming. You know you need to unload your shares. But if you get caught up in the BS, you’re just another hold-and-hoper.
Here’s what you can do instead — learn to ride the hype.
Get in the habit of monitoring social media for these penny stock pumps.
If you see a name mentioned over and over again, start watching the chart. Keep a close eye on it.
And if you’re fortunate enough to get in early and trade a hyped penny stock up hundreds of percent, sell as the price and volume are still rising.
In other words, sell into strength. Don’t get greedy.
It’s OK if you don’t nail the exact top.
Most successful traders don’t, they just book a lot of small wins in a row.
I’m still trying to wrap my head around why LTNC has such a religious following on Twitter … In reality, it’s just like every other penny stock.
I know because I’ve seen it countless times … I turned $12,415 into $7.1 million* trading primarily penny stocks for the last 20+ years.
The patterns repeat time and time again.
They blast off on high volume and longs rush to Twitter to hype and pump.
I’ve seen penny stocks up 200%, 500%, or 1,000% … and every time greedy promoters clamor for more. Ironically, a lot of these ‘cheerleaders’ don’t understand what the company does. They only care about the stock going up.
Then I tweet to warn my students about the inevitable crash, and promoters line up to try to talk smack or put me in my place. Please.
It’s fine. I’m a big boy … I can take the hate. What I can’t take is watching newbie traders lose money in such a predictable way.
The pattern is always the same … so learn the history and trade your plan.
Sell into strength and never believe the hype.
What do you think about the #LTNCArmy? Let me know in the comments — I love to hear from my students!
*While Tim Sykes has enjoyed remarkable success trading stocks over the years, earning an aggregate sum of over $7 million in trading profits between 1999 and 2021, his primary income derives from the sale of financial education products and subscription services offered by various businesses and websites in which he has an ownership stake.
This level of successful trading is not typical and does not reflect the experience of the majority of individuals using the services and products offered on this website. From January 1, 2020, to December 31, 2020, typical users of the products and services offered by this website reported earning, on average, an estimated $49.91 in profit.
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