Stocks

I hope you’ve been reading my articles for the past 10 days because you could potentially have made FISTS FULL of CASH! Well, make sure you visit INVESTOR SOUP regularly and SIGN-UP for MY FREE EMAIL ALERTS; I’m going to try and find you a BUCKET this time and MAKE IT RAIN! continue

LMCO Could Electrify Your Winnings Again!

Good Morning!

Remember my April alert on LMCO? It delivered a first day gain of 63%.  And what followed was even better: a 7-day run that drove the price up to $2.25 … for a total gain of over 160%.

Well, LMCO has since pulled back to around $1.40 … a 37% drop … that could now hand us a HUGE opportunity to profit from the dip. continue

When I came across this company and its name, I couldn’t help thinking about one of my favorite movies of the last 5 years:  I Am Legend with Will Smith. If you haven’t seen it, rent it!  It is not a happy, feel-good movie.  In fact it is quite harrowing, but very well done.  Will Smith is awesome.  Here is a link to the official site:  I Am Legend.

Back to Penny stocks!

Legend International Corporation (LGDI) came up on my radar screen because of its chart.   When I dug in, I found another natural resource play with no revenues but with “great prospects”.   LGDI’s gig is phosphate and their fields are all in Australia.

Here is a succinct review of what they do:

Legend International Holdings, Inc (OTCBB: LGDI) is a mining and agriculture resource development company. The Company is principally focused on developing its world class phosphate deposits in the
Georgina Basin of Queensland, Australia. Legend controls a significant strategic portion (5.2 million acres) of the Georgina and McArthur River Basins in Australia’s Queensland and Northern Territory, hich are highly prospective for phosphate.”

Here is the chart:

The stock is sitting on a significant support level and while the Stochastics and RSI are not compelling, the MACD looks like it is about to cross.  Still below the zero line, the MACD is giving a weak bullish signal. Volume has really picked up, too.

The other reasons that I like this penny  stock are anecdotal. The company seems to be sitting on some very prolific and valuable mining claims.  You can tour their website and see for yourself.  They have kept their PR firm busy with all sorts of flattering PR’s…permits for this project and that project mainly.  Lost in the shuffle has been the news that the company is extraordinarily well capitalized.  No long term debt, cash of almost $80 Million…these guys are set up for success.

Legend has big plans.

They are confident bordering on cocky. Here is a little blurb from their site:

“Legend plans to produce an average of 5 million tonnes per year of phosphate rock concentrate of 30%+ P2O5 by 2012, thus becoming one of the world’s leading producers of phosphate rock.“

I am rooting for them.  I like their bravado.  It is said that “it ain’t bragging if you can back it up”.  Let’s see if they can back it up.

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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DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

I monitor our chat room on a regular basis and see many penny stocks being talked about.  Some are great companies that are making a stop in penny land before they ascend to Nasdaq or better, some will be penny stocks forever and some are downright toxic.  The challenge for any penny investor is to determine which category their stock is in.  If you are a nimble trader, you can make money with any type of stock.

A stock that seems to be getting a great deal of attention on the web is EXPO HOLDINGS, INC. (EXPH). The general consensus is that it will go up…..however, there doesn’t seem to be too much confidence behind that consensus.  I think this should be a radar stock for tomorrow based upon the buzz and also the company itself.

EXPH’s focus is to become a holding company, to acquire and develop companies that sell products in the retail sector. One division, D & D Displays, is a manufacturer of display fixtures for retailers like Lowe’s and custom cabinetry for retail sales.  The second (from the EXPH website) is 1st Choice Closets.  I am not sure how this company fits in with their latest press release about a new website (easytoinstall.com) and a new line of products that will be unveiled next month.  In the absence of any concrete evidence, all I can say is that is appears that company management is making some good moves.  Whether they will pan out remains to be seen.

Here is the chart:

The chart appears to contradict itself in several ways. The MACD, while above the zero line, is below the signal line and showing bearishness.  However, the angle is decreasing as you can see from the histogram and if it turns could change to a bullish indicator quickly.  The Stochastics are indicating that EXPH is oversold and that might help the stock to rebound in the short term.  EXPH is trading above both its 50 and 200-day MA.  The small cap  stock is trading at the lower range of the Bollinger bands and could turn either way very quickly.

Bottom line: This stock may have a run in it.  Be careful if it gaps up at open.   This is not a good penny stock stock to chase.  I have read comparisons of EXPH to SPNG and that is laughable.  This is a not a financially strong company with a lousy capital structure like SPNG.  EXPH has only minimal revenues and no strong brand  and has to prove a lot before they can be considered a SPNG-like stock.

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DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Today’s penny stock screen gave me the name of a company that I believe has some real potential.  It is a high-risk, high-reward small cap stock play that may take a few days or weeks to realize its potential.

Enough intro…  The stock is Adamis Pharmaceutical Corporation (ADMP) and it is a penny stock that is beaten down from a chart standpoint.  There are going concern issues, concerns about the ability to fund the development and clinical trials for their suite of anti-viral drugs. and not a lot of good news on the boards.

To the Chart!

The chart looks both good and bad.  The MACD is bearish. but not overly so.  Stochastics indicate an oversold position, but to me the most telling statistic is volume.  Look at that volume!  That indicates to me that other larger players are in this stock.  If volume can remain strong and the IR people can put out some meaningful PR, this stock could fly.  The Bollinger Bands have narrowed and it is trading at the lower bands.

The wild card for this stock is contained in the June 23rd PR (read it here).  The company announced that it had begun shipping its first product:  pre-filled epinephrine syringes  (PFS) (Epinephrine Injection USP 1:1000.  According to the company, they will quickly capture a significant percentage of the $200 MM Epinephrine market with a product that is superior to what is already on the market.  I always take such pronouncements with a grain of salt, but I will be interested to see PR related to this product launch.   The company realizes that this product launch has to be successful for so many reasons:  current cash flow, good PR, showing investment community they are viable, etc…

Given what I had said about the precarious financial condition of the company, the obvious question is “what about the downside?”  While I did not get hard numbers or revenue guidance out of the company when I called them, it was clear that they believe they have turned the corner with their EPI product.    Without the release of any financial info or guidance, I  recommend that you keep a tight stop on it if numbers disappoint.

Definitely a good radar penny stock.

These are some penny  stocks that I believe might be worth putting on your penny stock radar list.  Some are old names that you see around the small cap  chat rooms and some are new ones that I have unearthed and feel are worth taking a look at.  I have searched for small cap stocks that have interesting charts and are looking like they could turn and deliver some nice gains for my readers:

NTRO

NTRO is one of those penny stocks that gets lots of play on the boards and is prone to being “pumped”. However, the MACD has turned bullish and is approaching the zero line.  It is neither overbought or oversold and is trading at its 200 MA line.   Support is in the .026 and .027 cent range and resistance is .039, .040 and .050.  The stock is an oil and gas play, development stage with no revenues and limited cash.  Short term play only!

PWEB

This is a stock that may take several days or weeks to “turn the corner”, but it is worth looking at. Pacific Webworks, Inc. (PWEB) bills itself as a “one-stop shop” for companies that are trying to get their businesses online.  According to their  July 29th press release, the company generated $9.2 MM in revenue last year and previously forecast $16-$18 MM for the current year. The company now believes that full-year revenue will be $23-$24 MM.

The  stock is trading down to the lower Bollinger band and is becoming oversold.  The MACD is still bearish, but I think my readers want to be there when it turns bullish. With a strong company, strong balance sheet, surging revenues it is only a matter of time before this stock gets hot again.  I recommend checking the news and chart for this penny  stock every day until it turns…and, I believe it will.

SCLX

A China play that has “rebound” written all over it.  The stock has been beaten down over the past few weeks and Stochastics indicate that it is oversold.  I know that history is no foreteller of the future, but look at what the stock did every other time (recently) when it hit oversold status.  POP!

The stock is at a key support level and while the MACD is bearish, the stock has kept up good volume and could turn quickly. The company is posting some huge numbers and growing like a weed.  Once the profit takers have sold out, the stock could rebound through resistance at .45, .47 and .50.  After that, there is not much resistance until its recent high of .59.

Have a great week.  Don’t forget to protect your profits when they come. Keep those emails coming!  I love your feedback and ideas.

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Continuing my series of blogs on penny stocks that my readers and subscribers have sent me, today’s spotlight is shining on e.Digital Corporation (EDIG.OB). Can you dig it? Probably not!.  After going through a number of dogs that some readers submitted, I was pleased to actually be researching a real company that has revenues and bright prospects.

EDIG provides digital video/audio technology (DVAP) platform for use in the production of portable electronic products.  The company’s website claims that they are:

“….. a proven innovator of multiple audio and video technology platforms including its secure portable Video on Demand eVU™ mobile entertainment system. Through its eVU sales and services, e.Digital is one of the leading producers of dedicated portable In Flight Entertainment (IFE) to airlines around the world.”

What I like about EDIG is that they are  profitable, growing TEN cent stock. The company just issued a press release proudly announcing record revenues and a yearly profit for FY 2009 ending March 31, 2009.  The booked $11.1 MM in revenues, a 99% increase over the previous fiscal year.   Profits were an astounding $5.9 MM for the same period…and, the stock dropped like a rock.  I found out why….the profits were not “in the ordinary course of business”, but rather patent enforcement awards from companies that infringed upon their patents.  I do not know if that business model is sustainable.

What I don’t like about EDIG is their capital structure. They have an obscene number of shares outstanding and in float.  All of the good news that they are putting out barely moves the small cap stock.  In fact, once they issued their glowing PR about FY 2009 results, the stock dropped from 15 cents to 10 cents.  I really enjoyed the reading the board bashers pound this stock.  It seems that this penny stock is polarizing.  It has a history of being pumped.  In fact, it was a $25 stock almost a decade ago.  Management has gorged for years in the public trough (i.e. stock issues, paying everybody in stock,etc…)  and now very few trust the stock.

Just like I recommended with SPNG, they should drop a bomb in their capital structure.  A buyback of a hundred million shares would help.  It would only cost them $10 MM. The company actually has a decent balance sheet…some cash in the bank and no long-term debt.  It has a retained loss of almost $80 million which should provide a buffer against taxes for a few years.   But, their capital stucture stinks.

Having said that, let’s look at the chart:

The small cap  stock has been beat down of late and the indicators are a bit “muddy”.  Stochastics are indicating that the stock is oversold (maybe we’ll get a bounce), the MACD is slightly bullish (although it is below the zero line and approaching the signal line) and the stock is in distribution.  The stock has a 52 wk. range of .08 to .20.    Not very impressive for a profitable company.

eDigital – Can I Dig it?  I’m not sure. It is a typical penny stock and is extremely volatile and almost impossible to predict.   The signs seem to point to a rally and with a decent balance sheet, the company should be around for a while.  I didn’t pick up on the boards if they are a takeover candidate, but that might make sense.  An acquirer wouldn’t care about their bloated capital structure.  They would only care about EDIG’s patent and product portfolio.

Let me know your thoughts about EDIG.  I am going to watch it…I’ll let you know if  see a breakout.

Editors Note:   I recieved an email from a reader, Peter Taylor.  Mr. Taylor pointed out some things that I missed and I have made changes to my post above.

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

TWPG or Thomas Weisel Partners Group is an San Francisco-based  investment banking firm, offering investment banking, brokerage, equity research, and asset management services in the United States, Canada, and Europe.   The company has struggled with at least 5 quarters in a row of operating losses.  They also had a huge ($97MM) mark-to-market writedown in the 3rd Q of 2008.  As a result, their stock has been beaten down.

The reason for the title is that whenever I read about any company in the investment banking arena, I think of Michael Douglas as Gordon Gecko in Wall Street.  Having been a CPA and venture capitalist, I know their ilk very well.  I think that his portrayal was “spot on”, but I am not here to bash investment bankers.

However bad the news has been for TWPG, there is hope. The company has a strong cash and liquidity position and is well positioned to take advantage of its strengths when the capital markets come back (and they will).  What neither I nor TWPG has is a crystal ball to know when that it.  That is why I am going to talk about THE CHART!

What makes this company interesting is the chart. I think that this company might “pop” in the next few days or weeks.  It has taken several quarters of bad news and the general malaise in the capital markets to beat their stock down to the present level.  At $3.80, the stock’s next support level is $3.50.  Resistance is at $4.25, $4.50 and $4.75.  After that, I could see the stock surpassing its most recent high of $6.16.

Here is the chart:

The MACD indicates that the stock is in a bearish mode, but I feel that the oversold pressure will give this stock a bounce.   Earnings have been released already and TWPG, as a respected I.B., doesn’t play the press release game.  So, the movement in the stock is going to come from the chart. Watch the MACD for any improvement and if you see it cross, I would suggest keeping a real close eye on it.

Keep this one on your radar. TWPG is not going anywhere.  There are no going concern issues and the company is surviving in this economy.  It won’t take much for the stock to jump.

Good luck and good trading

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

I must admit that I am sitting in a camp cafeteria at 11 pm Monday night blogging.  It isn’t just any camp.  It is Cub Scout Camp in Manchester, NH.  I am here with my oldest son, Nicholas, who is a Webelo.  We are having an awesome time and I will tell you that the Boy Scouts of America is an awesome institution.  After campfire, I was able to sneak away and blog.

I am not going to get too in depth.  It is late, I’m tired and I have a busy Scouting day tomorrow.

I found another stock that is due for a correction.  This is a short that you should be looking at.  LiveWire Mobile, Inc. (LVWR) clearly has a chart that says it is going to drop.  Here is the chart:

Bullet points (because you’re smart and I’m tired)

• Stochastics indicate a severely overbought position
• The stock is overheated…rising from .14 to .21 in the matter of a few days
• The stock is trading above both the 50 and 200 MA and along the top of the Bollinger Bands.  The pressure seems to be for a correction.
• The RSI indicates that the stock is approaching over over-accumulation
• HOWEVER, the MACD is still showing its bullish tendencies

I feel that this stock should be followed.  Never forget that penny stocks are subject to manipulation.  I recommend that you put tight stops on your trade.

Good night all!

Why am I talking about newspaper stocks when they are all just “dead men walking”?  Because I am a short-term trader and I am looking for both stocks to bounce in the near term.  Very few sectors have had as much bad news as the newspaper sector and any good news could make them soar.  Many pundits are talking about an economic recovery…why shouldn’t newspapers share in that as well?  I don’t have a crystal ball, but both companies bear watching.

Gannett Co., Inc. (GCI), the nation’s largest newspaper publisher and parent of USA Today, is a highly diversifed media company.  They have interests in newspapers; national, regional and local.  They have a strong online presence through sites like Careerbuilder.com which they own and they run over 20 television stations.   They, like other newspaper companies, have suffered with the decline of advertising revenues, but with drastic cost cutting and restructuring, they even managed to post a small profit in Q1 of 2009.

GCI’s chart doesn’t make anyone very confident, but it doesn’t scare me off, either.  The stochastics indicate that the stock is highly oversold.  The MACD is showing bearishness, but it is hanging around the zero line and could turn quickly.  Volume is holding steady, but any increases could help drive the stock.  The stock dropped through a big support level at $4 and the next support level is $3.    Resistance is at $4, $5 and $5.50.

Lee Enterprises, Inc. (LEE), is an old line company (founded in 1890) and has established itself as publisher of both newspaper and online content in many midsize markets across the US.  It publishes 49 daily newspapers, over 300 weekly and specialty publications in 23 states.  LEE is in a much more precarious financial condition than GCI with high debt and losses piling up.  LEE is, by far, the riskier of the two companies, but we are talking short term only.  The chances of LEE filing Chapter 11 are slim, but I hope my readers watch it closely.

LEE’s chart looks very much like GCI’s (i.e. It is off significantly from its high and is looking bearish).  From the chart it looks like their is support at the 45 to 50 cent level with resistance at 80 to 85 cents.  Stochastics indicate it is oversold and the MACD is definitely bearish.  Like GCI, if they get good news or some buying hits the stock, it could rocket.

I would recommend putting both on your radar.  They may have farther to fall, but I believe that they have some bounce left in them.

Good luck and Great Trading,

Jeffrey Dean

About InvestorSoup

InvestorSoup.com is committed to provide intelligent commentary and solid analysis of small cap stocks, micro-cap stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily on the underserved OTC stocks market, or “penny stock” market, which has traditionally been shunned by Wall Street. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.

Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Neither InvestorSoup.com nor its affiliates have a beneficial interest in the mentioned company; nor have they received compensation of any kind for any of the companies listed in this communication. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

HEB is one of the most “popular” stocks in the microcap stock universe at present. It was so popular that our chat room (www.stockhideout.com) opened another room for HEB junkies. And, I say “junkies” and mean it. I monitored some of the posts and people were talking about it being the next Genentech (a little exaggeration).

Let’s talk about what we know:  THE CHART

Not much help there, frankly.  The picture is kind of muddy.  Let me explain.  The MACD is right at the zero line and looks like it could cross over (which would indicate a bullish condition), but hasn’t done it yet.  Stochastics indicate that the stock is neither overbought or oversold.  Volume has tailed off…still over 5MM shares traded, but down significantly from just a few weeks ago.  The stock is trading over both the 50 and 200-day MA’s so there might be some downward pressure towards lower support levels.  Short ratio has increased over last month to about 8.6% (a/o May 26th)….not especially worrisome.

What’s next:  FUNDAMENTALS

Not much help there either.  As with most Pharma companies (with drugs in development), income statements and balance sheets are often not very encouraging.  HEB’s is better than many others that I have seen.   It has cash to get it through the next quarter or two (hopefully), it has NO long term debt (which is very surprising and positive) and has positive equity.  However, at the current burn rate they will have to raise capital sooner rather than later.  They have to contend with a “dicey” capital market.  To raise capital, I am guessing, they will go to a private-equity group that will give them $20MM at a share price significantly less than market.  The net effect of that is to drive the share price down….unless the next thing happens

What is really going to drive the stock:  NEWS AND HYPE

Is it a dollar stock or a $20 stock? No one can seem to agree.  I have read a great deal on this stock and I still can’t tell you whether it is a diamond or a marble.  I am not a pharma expert, so I will rely upon others.  Here is an article that was posted on Seeking Alpha that does a good job of explaining the “technology” behind HEB’s main drug, Ampligen.  The swine flu pandemic had a small impact on the stock price of HEB, but since they are not a pure swine flu play (like NVAX or Novartis), they didn’t get any lasting lift.  With FDA approval delayed, the stock has been acting very jittery.  However, recognition of HEB’s Ampligen by other countries (Italy, Japan and Australia) appears to bode well for HEB.

We know that if the FDA does not approve the stock, you have a $1 stock (in about an 10 minutes).  If it is approved, you have a rocket.  I won’t be in the stock by the time it reaches $20, but I am seriously thinking about getting back in.  I am going to watch it closely and read more on the stock.  If I do play it, I will have a pretty tight stop on it.  I have already played in and out of the stock and made a good profit.  I believe that it might be a winner…..I’ll let you know how I do.

In yesterday’s trade alert posted on our site (and widely disseminated around the web), KERX was one of the stocks highlighted.  We had several emails asking for more info on KERX, so we are happy to oblige.

The first thing to say is that we are not experts in pharma….very few people are.  Pharma seems to be one of those niches that people act like they are experts, but there are so many “wild cards” in pharma that I believe they are kidding themselves and you.  KERX is a case in point.  Do they have a viable new drug or are they playing the news release game with old info? (they have been accused of that)

Just who is KERX?  Keryx Biopharmaceuticals Inc. (Nasdaq: KERX) is a company that (from their website) is dedicated to developing and commercializing novel therapies for the treatment of life-threatening diseases, including diabetes and cancer.  I, for one, am rooting for them.  My Mom and Stepmon both died from cancer and my Dad suffers from diabetes.  My Dad’s diabetes has reached the stage that he is probably going on kidney dialysis (one of the unfortunate side-effects of the disease).  Just because I want them to succeed doesn’t mean I would invest in them.

Let’s take a look at KERX.  A 9 cent stock as recently as February 9th, the stock has climbed “off the mat” to close at $1.25 on June 9th.  In between, it tickled $1.58 intraday in early June when the company reported positive news on their kidney disease drug, Zerenex., which is currently in its phase II clinical development stage.  They also have a promising anti-cancer drug called KRX-0401 (perifosine), an oral anti-cancer agent that modulates Akt, a protein in the body associated with tumor survival and growth. The drug candidate is in phase II clinical development for multiple tumor types.

The technical analysiis from our trade alert is good and some of it is re-printed here.  In its recent chart, KERX’s Bollinger Bands indicate greater than normal volatility as reflected by an increase in distance between the upper and lower bands. It is trading at the upper limit of the Bollinger Bands, the stock reflects neither an overbought nor oversold condition relative to its recent price trend. MACD reflects a strong bullish signal, with the indicator above the 9-day moving average signal line, and also above the 0 level, indicating that moving averages are trending higher. Stochastics are not yet showing that the stock is overbought, but it is close.  The stock is trading well over both its 50 and 200 MA lines.

However, we don’t live in charts alone.  We also live in fundamentals and news.  Let’s talk about news.  Keryx has gotten some very good news lately and with their drug, Zerenex, awaiting approval from the FDA to start stage III tests, more good news might follow.  Fundamentals are a different matter.   Keryx’s auditors issued a going concern stipulation in their audit report and as most pharma companies they bleed money prodigiously.  You have to ask yourself the question whether Keryx will be able to fund the development and trial to bring these drugs to market.

I believe that this is a short-term play only.  And, watch the downside.  This stock could be a 9 cent stock again very quickly.  I tend to doubt that, but with Pharma swings of that magnitude are not uncommon.

Today’s blog is a follow-on to my last post and it involves a defense stocks that may be worth “taking a look at”.  The star of the bunch is a  stock that is very well known in this sector, Taser International (TASR).

TASR has a long history in this niche and is a very recognizable name….not always for the right reasons.  Their mission is an honorable one (from their website) :  “TASER provides advanced Electronic Control Devices (ECDs) for use in the law enforcement, medical, military, corrections, professional security, and personal protection markets. TASER devices use proprietary technology to incapacitate dangerous, combative, or high-risk subjects who pose a risk to law enforcement officers, innocent citizens, or themselves in a manner that is generally recognized as a safer alternative to other uses of force.”

TASR, as a stock, has been both a meteor and a rock.  From its IPO price of $6.00 in 2001 to its high of $154.00 in early 2004, this stock was the darling of the market.  The stock was so hot, in fact, that it had THREE stock splits in 2004 (a 3 for 1 and two 2 for 1′s)!    Then a series of poor business decisions (Auto Taser, anyone), some very bad publicity and very strong selling dropped the stock precipitously.  The stock has over the  last 5 years trended down.  In the last 52 weeks, the stock hit its 52 week high in late September of 2008 and then dropping like the proverbial rock it hit a historic low of $2.54 in November of 2008.    The stock has proceeded to make turtles of its chart over the past 6 months.

I am still bullish on the stock, however.  I took a look at their financials and key statistics and came away impressed.  They have a very solid cash position, no long term debt (which I like), and solid revenues.  They did show a small operating loss in the most recent calendar quarter, but I see that as more as a blip than a trend.  What is most encouraging is that they are well diversified in several strong, recession resistant (is anything recession proof these days?) markets (law enforcement and military).  Another encouraging sign is that their short interest ratio has declined significantly of late.  It is trading under both its 50 and 200 day moving averages and Stochastics indicate that this stock is oversold.  I am putting my money where my mouth is and buying 1000 shares in my e-Trade account.

To bring Jack Bauer back into the mix, he would really like TASR’s products!  I have seen both bad and good guys reduced to quivering mounds of Jello by being “TASERED” on his show.  Then after a period of incapacitation, the person is as “good as new”.  However, when Jack shoots someone with his regular gun they usually stay very dead.  I wonder if TASR does product placements on shows like 24?  Might be a good idea.

Other small-cap defense stocks that  you can take a look at are:

ASTC – helmed by T. Boone Pickens III, this stock is not doing much to attract the interest of traders.  It trades in the $1.00 region, but has limited volume.  It appears that the company lives and dies with the NASA budget, so that might be a concern for the company’s long-term prospects.

KRSL  – Trading around the mid $3′s, KRSL has a good chart that bears some study.  It is not a very exciting company.  They are metal benders (metal fab company) that sells into both high-end military and commercial applications.  They have the same problem as ASTC…little or now trading volume.
This season’s cliffhanger had Jack on his death bed barely clinging to life.  Since they haven’t cancelled his show, I am sure he will be back for another rip-roaring season.  I can’t wait.

One of the lead news items today was the depressing fact that foreclosures nationwide peaked in April 2009 after setting records in Q1 of 2009.  Realty Trac, an online real estate marketing firm, published comprehensive statistics regarding notices of default, auction notices or bank repossessions.  Foreclosure filings were reported for a stunning 342,000 homes in April, up slightly from the previous record month in March of 2009. 

A copy of the full Q1 report from Realty Trac can be found here.

Of course, that does not bode well for housing stocks.  Most are down sharply in today’s trading and the long-term outlook does not look good given the preponderance of bad news.

On a personal note:  My wife and I just sold our house and are renting for the next year.  We are consolidating our finances and looking to buy in a year.  We will try and poach a foreclosure and plan to be aggressive on the negotiations…whatever property we find.  According to the real estate people I know, the “Perfect Storm” of factors will continue to drive housing prices down for at least the next year. I don’t think that we are unique in our outlook either. An interesting fact is that the house we are renting is owned by a developer who couldn’t sell it!

The main housing stocks are listed here:

Name/ticker                 5/13 close            Short Int. % (as a percent of float)
Centex ( CTX)                 $10.12          11.80%
DR Horton (DHI)           $  9.48          11.50%
Hovnanian (HOV)        $  2.65           23.50%
KB Home (KBH)             $15.86          17.60%
Lennar (LEN)                 $  9.39           17.60%
Pulte Homes (PHM)     $10.71         13.40%
Toll Brothers (TOL)      $19.06         13.10%
Ryland Group (RYL)    $20.25        20.60%

For the near term, I think there is money to be made on the short side of housing stocks.

I remember a whole series of articles from pundits in March debating where the bottom of the market was going to be.  It was a spirited event with most analysts saying the market had much farther to fall.  Of course, they were mostly wrong.  Now the pendulum has swung to pundits ready to declare that the bear market is over and we are entering a bull market.  It is hard to argue with those opinions given the performance of the market lately.

To my mind, this market is way too choppy to even begin to invest bullishly (read that long-term and holding).  I believe that we may see a significant correction in the weeks to come and anyone investing long-term is going to be giving back those gains.

How do you avoid being at the effect of the market?  It is quite simple … don’t play the market.  Trade!  If you are focused on individual stocks and not indices, then your chances of remaining whole in a correction (or profiting from an uptrend) is much higher.

A stock that I like right now is Energy XXI (Bermuda) Ltd. (EXXI). This stock has been beat down of late.  The company took a whopping write-down earlier this year (as so many other companies did in the mark-to-market fiasco) but, other than the catastrophic effect of that event, is surprisingly strong.  As a recovering CPA, I look first at its fundamentals.  I don’t see anything there that is alarming.  The company has cash on hand, good ratios (current, quick, debt coverage, etc…).  It has added debt of late, but does has sufficient debt coverage.  The fact that it is able to borrow in this environment is actually a good sign!  It has a number of producing oil and gas properties and are profitable on a operating earning basis.  And, the massive write-down (over $450 million) will act as a tax shelter going forward for many years to come.

The stock is only $.70 pre-market today and is up-trending strongly (from a low of $.30 in early March).  It is bumping against resistance at this price level with the next resistance  at over $1.00.  It has plenty of support in the $.50 and $.60 range, so I don’t think the downside risk is very high at this price.  Add to your analysis the fact that oil prices are on their way up in the near term and I think you have a winner.

This is a swing or position trade and with tight stop losses (trailing, of course), you should do well.  I am actively watching this stock with an eye to trading it myself.

Sorry for the bad pun, but I couldn’t help myself.

Today, I am going to analyze and discuss FAS and its antipode, FAZ.  What is an antipode you ask?  Wiki describes an antipode as “the region on the Earth’s surface which is diametrically opposite to another region.”  FAS  and FAZ are opposites in every sense of the word, as we will explore.

FAS and FAZ are both ETFs that seek daily investments results that are 300% of the price performance of the  Russell 1000 Financial Service Index.  What distinguishes FAS from FAZ is that FAZ seeks to reflect the opposite (or inverse) of the performance of the Russell index.

In my opinion, FAS and FAZ are tailor-made for day traders and swing traders.  Their extreme volatility and daily trading ranges make for a profit opportunity every day!  Both can be played at the same time since they are counter-indicated toward each other.

Let’s look at some charts!  Isn’t that amazing? There is no reason that a trader cannot trade both at the same time! The average daily trading range for FAZ is $2.67 and FAS’ is $1.42. That, to my mind, is a perfect setup for a trader.  Another thing that I have noticed about these two ETFs is that they tend to maintain their momentum for any given day.

If you can, by the chart or Wizetrade, determine the direction of the price movement, you can ride that movement for good profits.  FAZ and FAS are directly related to the news in the Banking sector.  If banks are going up, FAS will rise with them (and FAZ will fall).  Keep a close eye on the major banks and news about the financial sector to know which way to play these.

I believe that I have proved my point.  Now, go and make some money.  My goal is to always put my money where my mouth is.  I plan on trading these two ETFs aggressively next week and I will report back to you and let you know how I did.

A few weeks back, I wrote a blog about PXCE.  You can read it by clicking this link. I was first alerted to the stock by reading numerous posts  (so numerous that it was obnoxious) from James516 on our chat room.  The guy was pumping this stock like it was the next, great stock…a sure thing…a no-brainer.  I am always looking for good ideas, so I started researching it.

Just like the title of my first blog on this stock…”There was no there, there”.  I actually started to anti-post him (if that is a word).  When he would come into our room and start posting about this junk stock, I would fire back and let people know that it was a stock to stay away from.  James would come back to me with the hype…press releases, new technologies that would set the world on fire, etc…  But, never any substance.

I like a hype stock as much as the next guy, but there was no reason for this to be a $10 stock.  Well, on April 28th, I got some support on my position.  The SEC issued a temporary suspension of trading in PXCE.

Their release No. 59827 stated:

The Commission temporarily suspended trading in the securities of Pax Energy, which are quoted on the OTC Bulletin Board and on the Pink Sheets operated by Pink OTC Markets Inc. under the ticker symbol PXCE, because it appears to the Commission that there is a lack of current and accurate information concerning, among other things, an acquisition by the company, the value of the company after the completion of the acquisition, and the company’s current and future financial condition.

This is a reminder of why we, as investors, need to be leaders not followers.  There are any number of great small-cap  stocks to invest in….this was not one of them.  Someone who bit on this stock is really feeling betrayed and hurt right now.   Who knows how it will trade when it comes off suspension, but I am guessing a big downwards hockey stick.  I think we could be looking at a $.01 stock.

I just wish I could find some shares to short!

One of my favorite stocks that I have traded in and out of for many years is American Oriental Bioengineering (AOB).   AOB is a company that gets a great deal of U.S. press for a company that only has a $350MM market cap and sells primarily in China.  Maybe it is the name…easier to remember than a number of other Chinese stocks.  Maybe it is their track record (i.e. they have been a high-flyer in years past, trading as high as $14/share in late 2008).  Maybe it is because Chinese stocks are very volatile.  Maybe it’s because they market a drug Jinji Yimucao for the treatment of premenstrual syndrome (PMS) and every man in China is buying it for their wives and slipping it in their drinks when they aren’t looking!

As I mentioned in the last paragraph, I trade this stock and plan to again very soon.  However, on the day that I sat down to write this blog, I was amused by several news articles I read about AOB.  One was a story about the research/investment banking firm of Brean Murray which downgraded AOB on April 24th from Buy to Hold.  On the same reading list were several articles from the Motley Fools touting AOB as on of their 5-Star stocks.

Who’s right? Not sure, but I am siding with the Fools.  AOB has begun to climb back out of the hole their stock has been in early January when it gapped down from $7.03 to $5.51 on January 7th, 2009.  The stock continued to lose value until March 9th, 2009 when it bottomed out at $3.30.  Since then, the stock has been trending upwards and closed in Friday’s trading at $4.46.

The company appears to be very well run.  They have strong fundamentals (good cash reserves, profitable, good ratios, etc…).  The only thing that is of concern to me is the debt they added this year, but they have excellent cash flow and it does not appear to be an issue.  From articles that I have read and their own website, they have a stable of products that are selling well and several new ones in the pipeline.

As a chartist, I am not clear, yet, on the direction of the stock.  The MACD looks like it is close to a cross and it appears that AOB might be overbought.  It is trading above its 50-day moving average and with support around $4, it is trying to push into the $5 range without success.  It has tested $5 several times recently, but lacked the “oomph” to push through.

Now that I understand what they do, I will monitor the stock for the proper entry point.  However, I think I will make much more money now that I have signed up to be the U.S. distributor for their PMS drug.  Operators are standing by to take your order!

A commitment that I have made to my readers is that I will be transparent in my posts and share with you the good and bad about stock investing. This post will be uncomfortable to write. I have to dredge up some bad memories when I talk about this stock. JDSU was my “poster child” for how NOT to invest. Allow me to explain.

One of the painful memories that I have about stock investing revolves around the tech bubble that burst in 2001. I was not managing my own stock portfolio at that time and instead had a stockbroker handling it. It was the husband of my wife’s best friend. A really nice guy, but he was new in the broker business. He worked for a large Wall Street firm and really appreciated my business as he was growing his portfolio. I started investing with him in the late ’90′s and we did well for several years. I made a killing on Oracle (ORCL) and several other stocks. As this Dot-Com rally extended and people start getting really irrational (including myself), my biggest position was in JDSU.  I was heavily invested in this high, high-flyer that seemed destined to be the next Microsoft.  Well, we all know what happened. Before I knew it, my stock was worth one-fifth of what it had been.  My broker still told me not to sell…that is was going to come back. It didn’t and I finally sold it for a huge loss (also because I was angry and didn’t want to see it in my portfolio).

I have, since that date, tried to keep track of what my former “sure thing” was doing. JDSU has flirted with bankruptcy, been a penny stock, had some real struggles the last few years, BUT (and I can’t believe I am saying this) might be worthy of another look.

The stock has a strong balance sheet (plenty of cash ($3.15/share last quarter), good  ratios) that will allow it to ride through these challenging economic times.  The major box makers have cut back significantly on their orders and JDSU’s topline revenues reflects that.   Amazingly enough it is forecasting a return to profitablity within the next few months.

A look at the chart shows that the stock has rebounded recently to close yesterday at $4.68.  It shows that it has trading above its 50-day moving average and is pushing toward resistance in the $5/share range.  I think that JDSU might be worth a look  once we see how it reacts when it reaches its next resistance level.  It might push through and continue to make new highs or it might lose its momentum and fall.

Things to be aware of that caution me somewhat is that the MACD crossed over in conjunction with their rise from the mid-2′s in early March.  Look to see if any crosses occur if you are looking to the short side of this trade.  Stochastics also indicate that the stock may be oversold.  With an average voume of over 4 Million shares, you should have no problem getting in or out of the stock quickly.

I will be watching with you and looking to make some of my money back depending upon what happens with the chart.  It’s difficult for me to think about investing in that dang company because I’m still mad at ‘em…..and myself.