Home Page : www.otcjournal.com
Email Questions or Comments To:
editor@otcjournal.com
To
OTC Journal Members:
 |
Where Has All
The Volume Gone? Long Time Passing |
|
Are you old enough to remember the
folk group Peter, Paul, and Mary? Popular in the 60's and 70's along with
The Smothers Brothers and TV show Laugh In. If not, you don't get the headline.
Don't worry about it.
May is fast approaching, and its
time to start thinking about a summer strategy. Are we in for another drubbing
like the big sell off last May to July, or is there going to be a strong
summer rally where the microcaps start behaving a bit better?
A quick review is in order. We're
in the doldrums right now; fast asleep, despite the strong performance
put in by the big caps in recent days. This bodes well for micros. Recall
last summer. Large caps took off in mid August, and did not look back until
February. The micros starting perking up in September, and powered up along
with the big boys. They sold off February, but the switch has not flipped
back to the "on" position for micros. However, the performance of the large
caps is a precursor.
Here's a quick look at some of the
recent set backs we have had in OTC Journal microcap ideas:
-
PNWIF: Started at $1.80 in September-
High of $5- back to $4
-
CPNE: Stated at $.50 in August- High
of $3.40- back to $1.80
-
NIHK: Started December at $.06- high
of $.24 (ahead of itself)- back to $.13
-
TTGL: Started at $1.80 in December-up
to $1.40- back to $1.20
-
EFSF: Started at $.20 in January-
up to $.50- back to $.37
-
UCMT: Too early to call
So- what do all these ideas have in
common? They all (with the exception of new idea UCMT) had great
runs, they have all pulled back, and they are all trading very low volume
compared to the action a couple of months ago.
Is the volume coming back in the
near future, and should we expect new highs, or are all these stocks ready
to roll over and drop back to irresistible levels?
If the answer is based on corporate
performance, I believe the next move for most of the aforementioned stocks
is a break to the upside. If it's market related, read on.
Just like last summer, I believe
it's all tied to the price of oil. Here's a chart which shows the Russell
2000 (a poor index for micros, but it's all we've got) as compared to the
price of oil over the past two years.
If you can tell me where those red
lines are headed, I will tell you where the small stocks are headed. The
yellow arrows I provided show the opposing spiking prices- note the Russell
spikes up when oil spikes down, and vice versa over the last two years.
Last year at this time we were one
month away from Israel squaring off with Hezbollah- they
were lobbing rockets back and forth over the Israeli/Lebanon border.
Last July oil spiked to $76
dollars a barrel and CNBC trotted out every expert on Planet Earth
they could find to predict $100 oil was just around the corner. T Boone
Pickens became the CNBC poster boy for the century mark on lightsweet crude.
As oil went, the Russell 2000 went;
the other way. Oil fell apart in August, and the rally ensued.
I've spoken with a number of smart
technicians who believe oil needs to make one more big charge before embarking
on a multi year pullback. I've spoken to other "experts" who believe $68
is the current target, then a pullback will ensue. Others feel we are now
on a direct path to $100. Perhaps we are, but I don't believe it
is direct. I believe it is going to take a number of years.
Oil is in a bubble, fueled by geopolitical
conflict, war in the Middle East, and speculators. Don't bother sending
me your views on the international supply/demand equation as it relates
to China and India. Here's the fact: at least 20% of the price of oil is
all speculative money. It's big trading money. Oil is going up because
it is going up, just like NIHK did a couple of weeks ago. At some
point, it will go down because it is going down.
Oil flat or down scenario: inflation
goes from 2.50% to 2%, the FED can ease to bail out the real estate market,
cash is trash and stocks climb. A beautiful picture. Without last year's
Middle East fiasco, I believe we are headed for a pretty reasonable summer
rally, but keep your stops in place.
 |
Ever
Heard of TDON? Universal Cap (OTC BB: UCMT) Has |
 |
"Our electro-optic polymers (plastics)
are property-engineered at the molecular level (nanotechnology level) to
meet the exacting thermal, environment and performance specifications
demanded by electro-optic devices. We believe that our patented technologies
will enable us to design electro-optic polymers that are free from the
numerous diverse inherent flaws that plague competitive polymer technologies
employed by other companies and research groups. We engineer our polymers
with the intent to have temporal, thermal, chemical and photochemical stability
within or patented molecular architectures."
Does anyone have the faintest idea
what that statement means? I sure as heck don't, and I try to follow some
of this stuff to the best of my ability. That paragraph was copied out
of TDON's recent SEC filing.
Apparently, investors are in love
with the technology as the stock traded to a new all time high yesterday.
So, why do we care? This stock trades
in the obscurity of the Pink Sheets, and has no regulatory requirement
to file financial disclosure with the SEC. Therefore, I would never cover
it.
TDON filed a registration
statement with the SEC yesterday, which is the first step in becoming a
real public company, and someone liked the move as the stock made a new
all time high on the strongest volume in months.
Here's why we care- UCMT owns
nearly (according to the last 10Q) 1 million shares of this little baby,
and if they have the next Holy Grail of electro-optic polymers (whatever
those are), UCMT shareholders stand to make a nice gain. A $.20
is a $200,000 gain for shareholders.
I want to reiterate- this is why
I love UCMT- once it begins to trade more efficiently, it will trade
up alongside stocks in its portfolio. It's not there yet, but it's headed
there. It's just a question of time before this one gets "discovered".
Accumulate it now while no one is watching. It's been a while since I've
been wrong on an entry level, and this one is due to run up to $2.25
in
my view.
|
