To OTC Journal Members:
 

Comments in the BLOG

No new BLOG entries since the mid week edition. However, your comments and questions are always welcome. There have been a couple of comments on the BrandPartners mid week conference call you might find interesting, so check it out.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.
 

A Couple Quick Updates on Two of Our Current Ideas

Datascension (OTC BB: DSEN): DSEN announced on Friday morning that April was a record month for the company. Due to new client acquisition, as well as expanded business from existing customers, the company posted 49,179 production hours for April 2005. This growth represents an almost 22 percent improvement over April 2004. Moreover, the company delivered about $800,000 in revenues, putting them on pace to achieve about $2.5 million in revs this quarter. This would also be an all time record for the company. 

As market conditions improve, this is one of those stocks that could jump 30% before you know it. Keep an eye on DSEN. This company is going to deliver great hard numbers. Click Here to read the press release.

Xenomics (OTC BB: XNOM) was also back in the news on Friday. XNOM announced the company had filed for a patent on it's Transrenal DNA urine test for Downs Syndrome. This is another step towards the commercialization of technology which could eventually replace the amniocentisis test.

XNOM should only be considered by long term investors. It will be some time before the commercial introduction of their test, and their is some technical risk in this idea. Click Here to read Friday's press release.
 

Hope For A Mid Summer Rally and Some Micro Action

Let's face it- the microcap market has been dead for the last two months. In the April 2nd edition I suggested every one who was not prepared to hold through a tough market environment sell all their stocks. It has proved prophetic.

As I glanced down the list of the 11 microcap companies the OTC Journal follows on a consistent basis, I was struck by the fact that 7 out of the 11 are performing at the highest level in their history. Despite outstanding corporate achievements, the stocks continue to trade as if dead on the screen.

A common theme I have written on extensively is the seasonality of the market. History tells us the market tends to behave much better July to December than January to June. 2004 was a classic example- from Mid August on stocks traded very well, but have been beaten down in this March/April/May sell off.

Most summers lend themselves to light volume and sideways action with bias towards drifting down. However, early technical indications suggest there is hope for a summer rally this year.

For market commentary I use a chart of the NASDAQ Comp to cover the general climate. However, if you want to drill down into the potential for microcap stocks, you have to look at the Russel 2000 which more accurately reflects the action in smaller companies.

Here's some techno babble to describe what's happening in small cap stocks right now. 

There have been two major changes recently in the Russell 2000. It's interesting to note first that the RUT held a perfect .618 retracement of the big move up from late last year. The low in April of this year (shown in the chart) is where it held the .618 support. More importantly though, it has signaled a directional change in the last few weeks as one can see by the double repenetration of the 3x3 displaced moving average (blue line). 

This often signals a strong reversal in direction, which is why you see such a big thrust up in the last few days. Bolstering the view of a trend reversal is the behavior of the MACD, which has finally re-entered positive territory after being in a convincing downtrend for much of this year. The MACD is a much stronger trend indicator than Stochastics, as we use MACD to measure strong money and stochastics to measure weak hands. As you can see by the stochastics shown in the chart, it appears weak hands will likely be selling soon resulting in a pullback before the RUT continues higher. 

What does all this mean to you? It means that after a few months of boring, listless trading, there is hope for a summer rally which could filter down to the microcap stocks. 

In early April my crack technical team called a rally in the biotech sector. We vended up five trading ideas for your consideration. Below are the results of our five ideas based on quotes at 9AM Pacific Time on Friday.

Three out of five have hit our target price. Four out of five are profitable. The one loser- IMCL- should not have been a loss if you wanted to trade the stock. We published our idea on the 15th after the close, and after a negative report the stock opened the next day below our stop loss, so you should never have opened the position.
 

We called the rally in the biotech sector. We are now looking for a rally in the microcap sector. Many stocks have drifted down on listlessly on light volume. The first 20% will be easy money.

Here's an example. Isonics (NASDAQ: ISON) was a poster child for what happens when the momentum traders leave the market. ISON was one of the hottest stocks on the NASDAQ in the 4th qtr of '04. This was a $1 stock in August of '04. The momentum players got a hold of it, and it traded up to $6 on many millions of shares of volume in the latter part of the year. I featured a chart of this stock in the April 2nd edition.

The stock was hammered in q1 of '05 as the chart shows. However, on the heels of a recent acquisition, the stock has regained its old form, and is once again on a tear. As you can see, it took about three trading days for the stock to run from $1 to $3.50.

If money starts coming back into the microcap market, you will see the same pattern repeated. Pretty much everyone who was going to sell has sold, so most of these stocks will make 30% to 40% moves in a short period of time. 

It's a little early to start calling it a sure thing, but if the market continues to set up as it has been for the last two weeks, another reincarnation of the given-up-for-dead microcap market is in the offing.

I'd like your feedback; Do you sense a rally in the micros?- please email editor@otcjournal.com.

Two stocks are believe are poised for an easy 20% to 30%: NWWV and DSEN.

I believe we will see an earnings release from NWWV on Monday.

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