January 26, 2001
Volume IV, Issue 8
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To OTC Journal Members:

Trading Alert: NetSol International (NASDAQ: NTWK)

NetSol is a company we have been following since January of 1999. The stock was our biggest winner of all time, having seen a high of $75 (1835% return) in March of 2000, up from a starting point of $3.81 when the stock was on the bulletin board.

We issued a Trading Alert on this same stock back on November 1, 2000 at $9.09. The stock hit $13.06 on November 6th for a 42% gain if you took the whole ride. We set the stop loss at $10, so anyone following our advice would have made money.

Earlier this week NetSol International issued a press release concerning a recently closed financing which put the stock back on our radar screen. The key feature of the press release went largely unnoticed by the investing public. However, since Thursday morning, the OTC Journal has done a little detective work, and we now believe the stock is positioned for a nice move to the upside.

Thursday's press release revealed that NetSol International closed a private placement of 180,043 shares of stock with Deephaven Private Placement Trading, a division of Knight Trading Group (NASDAQ: NITE). The purchase price of the shares was $5.55. The shares are not free trading as of this time.

NetSol has now taken the positive step of making Nite Securities a shareholder. The largest market maker in the world now has incentive to see shares of NetSol International go higher. Nite has a history of making substantial returns on private placements.

Furthermore, in an innocuous one line sentence buried in the press release, NetSol mentioned they had canceled a previously announced funding sponsored by Ladenberg Thalman. The terms of this private placement would have been highly damaging to the share price. This is a very positive development.

We are therefore issuing a Trading Alert on NetSol International based on both the above mentioned corporate developments and the technical features found in the chart below.

Trading Alert Details

Note from the chart depicted here that the stock has formed the infamous "Cup and Handle" formation made famous by William O'Neill of Investor's Business Daily. The stock has "cupped" nicely over the last month, and the handle is extending out to the right on very light volume. This indicates a high percentage probability of a move to the upside on the next volume surge.

The stock is above its 9 day moving average (the yellow line), but just below the 50 day moving average (blue line). A break above $8.25 (the 50 day moving average) would be very bullish, and probably signal a breakout into the $10 to $11 range.

Therefore, here are the trading alert details:

  • -Buy up to $8.50.
  • -Your short term target should be $10 to $11 (but don't be afraid to take a smaller profit if the market gives it to you or let the stock run if it is trading well)
  • -Stop Loss- $7.25.
Please review the rules for our Trading Alerts found on the left hand menu of our home page. Please don't chase the stock if it trades up too quickly. Either wait for a pull back or stay away from it.

Use caution going into next week's FOMC meeting. If Greenspan does not lower interest rates again, the market will get clobbered. If he lower rates 1/4 point, the market will probably sell off, but his will be a great buying opportunity for some of the larger names. If he lowers rates another 1/2 point we will probably go higher.

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