WESTERN LITHIUM USA (WLCDF.PK)

I wrote a blog a few weeks ago (link here) about how the Lithium mining industry has been the favorite industry of “pump and dumpers”.  Today’s focus stock appears to have the marking of the next in a long line of Lithium pumps.

Wikipedia defines “pump and dump” as a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” their overvalued shares, the price falls and investors lose their money.

Say hello to WESTERN LITHIUM USA (WLCDF.PK).

Western Lithium has appeared on trader’s radars over the past few days with strong volume and several days of steady gains.  They are putting out a number of really positive PR’s which is the hallmark of lithium pumps.  I almost didn’t go searching past the frothy PR’s because I was so convinced that it was a scam….but, WLCDF might be a real play after all.

When I went to Yahoo Finance and pinksheets.com to look for info….there wasn’t any (other than PR’s).  That is usually a bad sign.  I did however go to Western Lithium’s website and found a wealth of information there.  They have the obligatory, slick website extolling the virtues of Lithium, how it is the metal of the future and how they are going to corner the market.  They drop all the right names and have lots of “facts” to convince traders that they are the right lithium vehicle.

But, I actually read their financials.  What I found surprised me.  WLCDF has over $17MM USD in cash with no debt.  The company has a quarterly burn rate that is very manageable and have plenty of cash on hand for operating purposes for several years (at this burn rate).  As of March 31st, the company had fully diluted shares of 110MM.  Not too bad for a penny stock.

The chart

The chart has all of the earmarks of a pump and dump.  It has had strong buying come into the stock lately, a bullish gap and a strong run to close at $1.00 yesterday.  See for yourself.  The stocks looks primed to fall, but it probably won’t be a collapse like so many of its lithium mining buddies (LIEG, AMEL, LTUM, BHWX and AMLM)

Where is the pump?

I looked for the newsletters plugging WLCDF as the latest pump and dump…and, couldn’t find any.  These guys may be legit!  I have several sources that tell me how many newsletters a particular stock is being flogged by and I couldn’t find any.  I was almost disappointed.

Bottom line

I still think that shorting WLCDF is the best course in the near term.  I look at this run (and the indicators) and think there will be a short-term correction.  It won’t correct for months like its brethren AMEL, LTUM and others did.  Once it drops, THEN that might be a good time to pick up some shares.  WLCDF appears to be the “real deal”.

I now have this one on my trading radar.  It will be fun to watch to see if it can be one of the winners in the lithium space.

Good Luck and Great Trading,

Jeffrey Dean

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