A superconductor (SC) is a material that can transfer electricity without encountering resistance within the material.
Imagine children on a slide in summer. A bit of water goes a long way, but many an attempt to catapult into the nearby pool will find an abrupt slowdown in the middle of the slide. Call this a conductor.
Now imagine the slide is coated in teflon, and the children are covered in high-performance machine oil by their loving parents – better, right? Ladies and gentlemen, the superconductor.
A bit of an oversimplification, but you get the gist.
So far, research has only brought forward SCs that have the slightly annoying property of requiring extreme pressure and temperatures of -100°C to -273°C, or -150°F to -460°F, to work.
But every now and then, research groups publish results about room-temperature superconductors, which spur the imagination towards levitating trains, novel MRI technology, lossless electricity utility lines, or 100x improvements in classical and quantum computing performance.
Most recently, researchers, this time from Korea, have once again claimed to have achieved just that feat with their prototypical SC “LK-99”.
Given the times we live in, it should come as no surprise that this catalyzed yet another hype rally, this time in a number of Korean and international microcap (and often, low-priced) stocks – for example Duksung Co., Sunam Co., or the old dot-com hype star American Superconductor (AMSC). See a chart of the hype in all three below:
If you look at the charts closely, you can see typical topping signs – sudden climactic 300-400% hyperbolic moves, heavy-volume reversals near the Highs, churning action, and price declines of 50-60% within 2-6 days.
Korean and other international labs so far have been unable to reproduce the results, resulting in a picture that eerily reminds me of that Italian lab that proudly boasted a few years back they could break the speed of light. It seems that LK-99 is not just not a room-temperature SC, but it might not even be an SC at all.
To be fair, it’s still unclear whether the researchers behind LK-99 are eggheads, but it is as clear as water that this stock rally is driven by the egghead crème de la crème.
If you miraculously happened to be in one of those stocks, let’s say you were “giving it a shot” in the bottoming AMSC, good on you. But “giving it a shot” is not a strategy … and even then you should be out now.
But whatever happens, don’t get in now – the move is most likely over. Sure, you might make some money on a bounce, who knows – but the odds are severely against you, and volatility is skyhigh, restricting you from properly managing risk. Remember, wealth comes from systematic and consistent long-term profitability, not the get-rich quick gamble in Korean microcap stocks that might as well blow you up.
