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OTC Journal Members:
This will be a long weekend edition
with a lot to cover. There was major news on Blue Zone and PhotoChannel
to share with you.
It was a crazy week in the markets.
The NASDAQ market has been down 10 out of the last 14 trading days,
giving back all of August's gains and then some. This morning was particularly
ugly with the Intel (NASDAQ: INTC) revenue warning taking the NASDAQ
down 250 points on the open. We rebounded from there, which suggests that
the market does not want to be below 3800.
Wednesday evening's Trading Alert
Hyperdynamics worked out well. HYPD closed at $2.375 on Wednesday,
and hit a high of $3.50 on Thursday. The stock closed at $2.81 x $3
today for a nice gain from Wednesday's close, and a reasonable pull back
considering market conditions on Friday.
If you are going to participate in
our Trading Alerts there are two sections you must read and understand
at our home page. First, go to the section titled Rules
For Successful MicroCap Investing on our home page and read it.
The Trading Strategies section at the bottom is very important,
particularly the part about trading stocks that gap higher at the open.
Secondly, read the section entitled
Alerts on our home page in order to fully understand how
these work. On Thursday we saw a lot of buyers in HYPD above $3,
which was too much to pay based on Wednesday's close. We suggested in our
Trading Alert that the stock was a buy up to $3. We still believe it has
a good chance to go to $4. If you own it above $3 you should set your stop
loss at $2.50, or wherever you risk tolerance is. Here is another trading
alert for you to consider over the weekend:
Mentor Graphic (NASDAQ: MENT)
One of the best market technicians we
know loves this stock. He has been one of the hottest CAs at www.swingwire.com.
This idea is based on the belief that stocks making new highs go higher.
Closing Price And Volume: $23.31 x $23.44
52 Week High and Low: $7.75, $23.875
Average Daily Volume: 745,863
Shares Issued and Outstanding: 64.2
Shares Publicly Traded: 42.4 million
Mentor Graphics manufactures,
markets and supports software and hardware Electronic Design Automation
products, embedded systems software products and provides related services
that enable engineers to design and analyze the components of electronic
For the six months ended 6/30/00,
revenues rose 10% to $266.2 million. Net income totaled $16.4 million
vs. a loss of $8.7 million. Earnings estimates are $.14 EPS for
the September quarter, $.37 EPS for the December quarter, and $.82 EPS
for the year. This is type of growth that Wall Street loves.
Traders should look to get
into the stock no higher than $23.75. Set your stop loss at $21.50, or
wherever your risk tolerance is. Look for the stock to hit $25 to $26 next
week if the market is cooperative. This is one that you can hold
for the long term if you like the company.
Important: If today's midday rebound
does not follow through at the open on Monday our Trading Alert is withdrawn!!!!!
Networks, Inc (OTC BB: PHCHF; MSE: PNI)
Outstanding news releases on this
company during the week. Wednesday the company announced that it had retained
Wall Street powerhouse Salomon Smith Barney as it strategic advisor.
On the same day the company announced that it had entered into an agreement
to acquire Moto Photo (NASDAQ: MOTO).
The Moto Photo merger is huge.
is starting its online digital developing service at the end of this
month with two Fuji mini labs. Moto already owns and operates 25 of these
mini labs which would cost PhotoChannel $250,000 each and take several
years to deliver. Moto already has 422 retail locations and in 1999
reported revenues of $36.8 million and net income of $1.65 million.
Moto also has 2 million existing
customers and has been looking to expand into the on-line digital processing
business. The end company will be a "Clicks and Mortars" business that
will have the ability to leverage its existing customer base into a more
powerful profit model.
The merger will probably take until
the 1st quarter of 2001 to complete. It requires shareholder approval and
regulatory approval. Shareholders of MOTO will be converted into
shareholders of PhotoChannel, and PhotoChannel will then
trade on the NASDAQ.
The Salomon Smith Barney relationship
and the Moto acquisition upgrade this company to a whole new realm.
It may take until 2001 for everything to come together, but we believe
that this could become a dream situation. If you own the stock and you
are a long term investor you have a chance at a 10 bagger.
This is a stock that investors with
a time horizon extending through 2001 should own. One technical negative:
15 million shares will be registered and become free trading with a cost
basis of about $.90 CDN in the near future. The stock is trading at a double
from that level right now. Profit taking could push the stock down, which
would provide an excellent entry level. We will let you know when this
event takes place, and keep a careful eye on the stock.
Zone (NASDAQ: BLZN)
finally launched the first commercial application of Blue Zone's
convergence software on Thursday. You can experience the first true convergence
driven web site at www.ctvnews.com.
Blue Zone's revolutionary
software allows CTV to create all the interactive functionality
of the site on the fly as news events occur. This is very exciting- It
is the first true convergence news web site ever launched.
We experienced the site with a cable
modem, DSL, and a dial up lap top. The cable modem provided the best video
by far. The DSL connection was adequate, and the video on the dial up was
terrible. However, the rest of the site functioned perfectly and allowed
the user to customize the experience based on their own personal preferences.
Spend some time at the site and formulate
your own opinion. We believe that other news organizations will adopt Blue
Zone's technology, which should improve the stock's performance.
If you wonder why the stock is trading
in the $5.50 range we have no idea. One would think that the deployment
of the software would have created some interest in the stock.
Now that the software is finally
in commercial use we should see some new interest develop in the stock.
We still love this one for much higher levels down the road.