About two weeks ago I commented on Chinese stocks (Down Week) that a way to make a quick buck is to wait for a short attack and then have the courage to buy. Well, it happened today as CEU was under pressure (China Education Alliance, BSD Medical: Biggest Price Decliners). They were down 33% as it looked like someone stole a play from the UTA playbook (Universal Travel Group Responds to Allegations, to Seek Legal Remedies) alleging that the web sites were a total fraud. I bought UTA that week and doubled my money in 8 weeks.
I was in again today on the CEU rumors. I got in a bit too early ($3.59) and then doubled my position at $2.99. We'll see how it works out this time. I saw that after the bell, CEU denied all the allegations, which I expected (China Education Alliance Responds to Online Allegations).
My strategy is not for the faint of heart, and I would not recommend anyone to do it with their lunch money. But I hate to see shorts get rich, off people who are scared, so this is my little way of putting the stock in stronger hands.
One reason I always doubt these short attacks is that if these companies were total shams, why would they regularly post results that are below expectations, or show that there has been some shareholder dilution?
Obviously, it wasn't a great day for me with the CEU meltdown, but hopefully I planted a couple seeds for profits down the road as I have with LIWA, UTA and CBPO before.