To OTC Journal Members:
 

Comments in the BLOG

There was only one new BLOG for your review this past week. I had to publish more commentary on the continuing sell off in Commerce Planet (OTC BB: CPNE). Technically, as far as I am concerned, all levels of resistance have now given way, and there is no longer any telling where the bottom is on this one- read the BLOG for my comments.

The BLOG is your opportunity to ask questions and offer comments. I will make an effort to answer every legitimate question. If I don't know the answer, I will contact the management and get the answer. Alternatively, if you have questions you don't want publicly displayed, you can always email me directly at editor@otcjournal.com.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG scrolls down from the upper right hand corner. The most current journal entries appear on the right hand side of you screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels in volatile markets.
 

Do You Still Love Me Now?

The virtual love fest fans had going with the OTC Journal throughout the winter months has come to an end. Against a backdrop of rocketing "Old Economy" stocks, the micros have come to a screeching halt, and are just barely hanging on to fickle bids. For the first time in many years, the market has turned its entire attention to the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Comp (the laggard of the three).

The DOW ended May with the best 5 month performance since 1998. It's been nine years since these behemoths of the DOW traded so well, and it is long overdue. On the plus side, the market could become the favored investment of the masses for the first time in the 21st Century, which would be OK with me and good for all of us market lovers.

This is a period of extreme frustration for me. I believe I am following the best crop of companies I've ever had in the nine years I've been publishing the OTC Journal. We had a number of doubles and triples in the past nine months, and fundamentally this is the best grouping of all time. There's nothing super high risk in the bunch, and a number of these companies are delivering real sales and earnings that should be translating into much higher stock prices.

So, when I watch a CPNE, with trailing earnings that suggest the stock should be trading at $4 absolutely falling apart- or a TTGL with $150 million in annual revs and a pathetic $60 million market cap, I feel like kicking the computer screen out of frustration. This is a tough time, especially against the backdrop of the large caps just cranking up the charts. Our faith is being tested.

The second half of this year is bound to be fantastic. If the large caps continue to behave this well, money will eventually start looking for stocks with value that haven't moved. Hang in there for the inevitable micro rally.

In the meantime, there were a lot of great developments from our followings this past week, and I was traveling, so I missed the opportunity to share some of the news with you. Here's recap of the week's events:
 

The Week That Was

Here's a recap of some very favorable events that happened in OTC Journal followings:

• Nighthawk Systems (OTC BB: NIHK): Thursday morning NIHK, an OTC Journal fan favorite, announced it had received the largest initial order from a utility in their history. The stock responded with a 30% move from $.10 to $.13 on 8 million shares of volume. NIHK is going to have a good year, and it could evolve into a great year. Clearly, there is some supply hitting the market on this one right now, but sooner or later we will have another break out. I strongly recommend accumulating NIHK between $.10 and $.11 as the stock positions for another run at some point in the future.
• Titan Global (OTC BB: TTGL): TTGL had dropped to the pathetic sub $1 level of about $.94 when this week's news hit. On Thursday, TTGL announced the IRS has confirmed the company will be getting a tax rebate of $4 million from overpaid excise taxes. The news put some life in the stock, and it rebounded to the $1.08 level on pretty good volume. Friday, post close, TTGL announced it negotiated a more favorable deal with Sprint, which will reduce costs and thereby increase margins. The stock should have some life again on Monday, but clearly all efforts to surge are being repelled by supply at this time. The stock simply needs more consistent volume. Management needs to do a better job getting its story told.
• eFoodsafety (OTC BB: EFSF):EFSF published some news on Thursday concerning potential side effects from one of the drugs used to treat diabetes. According to the release Avandia, used to treat Type 2 diabetes, increases the risk of heart attacks by 45 percent and death from cardiovascular disease by 64 percent. Diabetics are looking for alternatives to drugs, which bodes well for the future of EFSF. As long as this stock holds up in this $.38 range, I believe it is simply doing fantastic, and is positioned for another charge up the charts at some point in the future.
• PhotoChannel Networks (OTC BB: PNWIF): PNIWF disclosed quarterly results early in the week, and investors were reminded just how small this company is against the backdrop of a $120 market value and less than $10 million in annual sales. The company delivered a 53% increase in revs over the same quarter as last year, but it was only $1.317 million (CDN) in revs, and a loss of $.03 per share. PNWIF now sports about $21.6 million in cash, and is engaging in a major acquisition. The stock only gave about $.20 in ground on this news, which serves as evidence this one could really take off on the next major event. This stock is an industry play- not a great value story, yet. The market is in love with digital photo stories, and PNWIF is one of the only publicly traded pure plays. Look for upgrades to their listing and more fundamental developments in the near future.

Commerce Planet (OTC BB: CPNE) Stops Orbiting The Sun and Implodes

CPNE has been taken out to the stock market woodshed and beaten to death. I don't really want to continue harping on this one, but it was such a huge win for us over the course of 2006, and is now trading so inexplicably horridly, I have to continue to share some thoughts.

Here are some harsh facts about CPNE: The stock made an all time high of $3.40 at the end of February. Since that time it has been down 10 out of 15 weeks, and lost 62% of its value.

Like you, I am scratching my head, extremely frustrated, and wondering if something has gone wrong at the company and who knows it. Q1 numbers suggest the company is still on track and should be trading much higher.

The turning point seemed to be the announcement concerning the block sale to fund manager Jeff Feinberg of about 3 million shares at the $1.90 level, and subsequent registration statement of those shares. Ever since the transaction was announced, the stock has been falling apart.

There is hostility between the company and some early financiers who have massive amounts of very cheap stock, and my guess is those shares are beating the market to death.

The drop through the $1.44 level was a technical disaster in my view, and I don't believe I can call the bottom or turning point for this one. Read this past week's BLOG concerning what to do from here. 

Fundamentally I have no reason to believe there is a problem with the company other than what the stock's performance is telling me. I don't believe it is over for this company- this stock will get legs again. However, for the time being, it should probably be avoided by anyone but long term investors. The bottom could come Monday or two months from Monday, but sooner or later the sellers will become exhausted and the stock will behave better.
 

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