It seems that I am writing and blogging about SPNG about once a month.  This is my third blog on SPNG since May and we also did an in-depth research report on SPNG a few months back.  (Read #1 blog, #2 blog and research report here).

SPNG continues to be the darling of the chat rooms and the number ONE penny stock. Other small cap and penny stocks have come and gone (BEHL, HEB, BIEL, ATNO, etc…), but SPNG perseveres.  When I first wrote about SPNG back in April, I was impressed by the strides that they made turning a sponge into a cash flow machine!  I am still impressed!  SPNG has given its investors a feast of good news over the past few months.

The stock has made an impressive run-up over the last week running from 14 cents a week ago to close yesterday at $0.2130.  The chart still continues to be SPNG’s friend, but there are signs of cracks in SPNG.  Is the stock becoming overheated?  Is it going to fall like it did before when it fell from 28 cents? I think you can bet on it. Short sellers should be ready if the cracks get any larger.

Here is the chart:

Notice that the RSI and Stochastics are above upper limits and that indicates that the stock is overbought.  Notice also that the previous high ran in an overbought range for several weeks before falling.  Notice also that volume has picked up, too.  Further analysis that I did shows me that the Accum/Distribution has turned neutral and the stock 13-day MA has flattened too.  The MACD is still strongly bullish, but it has lost a little momentum.  SPNG may still run for a few more days showing some strength. (Note:  SPNG was down only slightly in after-hours trading)

That means to me that the penny stock is ready for a correction. One wild card (and something that I am surprised that the IR people put out)  was their latest press release.  They made a big deal about a report concerning short positions in SPNG.  Read it here. The report points out the 99% of short sellers in SPNG are “underwater” and the assumption they want everyone to have is that SPNG is not going down (and those short sellers are screwed). Their average cost is 16.3 cents which is not that far out of the money.  Are these short sellers going to get squeezed and start to buy in order to close out their positions?  If so, that could unleash a flood of buying that would further extend the stock.  I am not sure that is going to happen.

The piece of information that has been missing from SPNG’s press releases lately has been info on the recapitalization they announced some months back.  According to my sources, SPNG will accomplish that before the end of the year by qualifying for the NASDAQ or American exchanges. They could do it by merging with an existing company, doing their own reverse stock split…any number of ways.  With all of the eyeballs on SPNG, I am guessing that it will have a positive impact on the share price.

Now, however, I think that SPNG is setting itself up for a correction…just how big remains to be seen.

If it continues to advance then ride the momentum (trend is your friend!), but keep a tight stop on it. It is  still a worthy small cap stock and company.  Yes!  Is the market and traders making a big deal about a company that makes SPONGES?  Yes!  Does SPNG want to leave the penny stock world behind?  Yes, most definitely Yes!

I think they will be around long enough for us all to make lots of money on SPNG.  I know I have already…and plan to again.

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