Trading And Understanding Broke Out Inc (OTCMKTS:BRKO)

Trading penny stocks is not for the feint of heart. There are wild swings and extreme moves that lead many to thinking that they can get rich trading penny stocks. Social media is filled with plenty of names that claim to have made millions trading penny stocks starting with only a few thousand dollars. Yes, it can be done and has been done, but only those that understand how pump and dumps work have been able to make this kind of money. To understand how they work, have a look at Broke Out Inc (OTCMKTS:BRKO).We profiled Broke Out as soon as shares hit the OTC as Elite's new pick. For those that are not familiar with Elite, they are the most powerful newsletter group on the OTC markets. Their websites include finestpennystocks.com, smartstockchoices.com, smartstockwinners.com, BestAmericanStocks.com, and many others. What made Elite so powerful is that they have a massive database of names and followers. They even have other newsletters following their picks and then trying to pass off Elite picks as their own. Elite will blast their list several times a day trying to get as many buyers into their stocks as possible.Their last pick was Cloudweb Inc (OTCMKTS:CLOW), which we had warned our subscribers about and that Elite was looking for bagholders. Prior to CLOW, Elite promoted AgriEuro Corp (OTCMKTS:EURI) and America Resources Exploration (OTCMKTS:AREN). Both started at pennies and then exploded. EURI ran as high as $2.09 and AREN hit $1.30. However, both came crashing down after Elite stopped promoting both names and they got hit with the dreaded skull and crossbones from OTC markets, which BRKO has been hit with now as well. Here are the charts from Elite's last two deals before BRKO.As you can see with both deals, shares quickly exploded up the charts on what is known as the pump. Here the stock is pumped to a newsletter's subscribers. The newsletter entices its subscribers to buy with overly promotional emails. The latest from Finest Penny Stocks says:Here is why this company could go up from $3 to $20I don't release my special reports very often. Truth be told it only happens 5 or 6 times per year because it's hard to find stocks that wall street doesn't know about......but each of them usually goes up a solid 300% on average.....However from time to time I come across one like BRKO where the potential is truly monstrous.In this case 900 to 2,000% from its initial price of $1BRKO has gone up from $1 to $3.34 in the last 4 trading sessions and the stock is poised to gain a lot more than just that.BRKO is a rare breed of stocks that go unnoticed until it's “too late”. Luckily for us I found it before everyone else did and this type of super-high potential stock is something I only come across once or twice a year at most.Makes you want to buy doesn't it? Notice the email didn't say at what price AREN, EURI and CLOW are currently trading. Furthermore, the email says it is being sent by Keith Richie, the editor of Finest Penny Stocks. Looking at the disclaimer, we see that Mr. Richie is a fictitious name and that Finest Penny Stocks is being paid $110k to distribute the information on BRKO.The key for investors is understanding what all this means and what they should do about it. For one, novice/beginning investors should stay completely away from Broke Out Inc. The reason being is right now there's a lot of things going on that are out of the average investors control. For one, buyers are coming into the stock from the emails. Second, insiders that own free trading shares are selling. Third, shorts are trying to position themselves for when the dump happens. While the money will be made on the short side, this is a risky gamble. We watch the volume on BRKO and it seems to us that goal is to trap the shorts. Many times when a stock goes up, it's because shorts are forced to cover and buy back they stock they borrowed. We think this is the main reason why the stock has gone to $3.50 today.We don't recommend shorting while the Elite emails are still going out. When they shut down their servers, that's the time to go short. Shares of BRKO have just been given the dreaded skulls and crossbones from OTC Markets. This means buyer beware. We second this motion and we are not alone in urging caution. TheStreetSweeper has come out with their own article warning investors. This is a worthwhile read as they have a good record in identifying overvalued stocks. Proceed with caution and don’t be left holding the bag! We will be updating Insider Financial as soon as we know more. For continuing coverage on BRKO and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in BRKO and have not been compensated for this article.