Xinde Technology-WTFS , Chinese Reverse Merger Over
It is common knowledge amongst CNBC viewers that anytime Herb Greenberg conducts a segment on Chinese reverse mergers, he is going to be extremely skeptical. Greenberg was very early on this controversial subject, but eventually, he became incredibly right. Yesterday, he was critical of the fact that another China play, Harbin Electric (HRBN:NASDAQ) was going private, but was trading roughly $10 lower than the negotiated price, despite the fact that reputable firms like Morgan Stanley, Lazard and Goldman Sachs were responsible for the banking.
Plus, if you are a Greenberg follower, it’s probably safe to say that you have heard his negative comments on the Chinese reverse merger stock, Sino Forest (TRE:TSE) and most recently the ratings agencies for lending credibility to situations like Sino Forest.
WTFS the Chinese Saga
Today, at the time of this entry, Xinde Technology (WTFS:OB) has become the latest casualty in the Chinese reverse merger saga. However there is a difference between WTFS and other speculative Chinese stocks like HRBN and TRE, because as strange as it sounds, the money invested in WTFS is even hotter. In other words, sometimes investors don’t hang around too long in bulletin board stocks
Despite all of the negative press surrounding NASDAQ based Chinese reverse merger plays, many of them have the backing of major investment banks and also see some buying interest from money managers and hedge funds. On the other hand, penny stocks like WTFS , are almost predominantly traded by retail investors.
WTFS -Xinde Technology manufactures,develops and designs the engines and parts of combustible engines and despite the fact that WTFS has agreements with major players in China, investors have remained skeptical. WTFS has been a a high flier for the last few days, but is known as a “new deal” to many in the penny stock community. In other words, shares of WTFS didn’t trade very much, and sometimes not at all before June 16th. WTFS then went from zero volume the day before, to over 8 million shares on the 16th.
Once again there is nothing wrong with trading hot penny stocks, even after they have rallied, but there is one strategy to remember . We often state in our alerts to keep you time frame short, especially if you have a profit. This tactic is even more important when trading newsy Chinese reverse mergers, when talking heads like Greenberg have been right on the money in regards to his doubts about the true fundamental values of these stocks. As you may have noticed, shares are of WTFS are down more than 40% at the time of this entry.
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