To OTC Journal Members:
 

Special Announcement: Limited Service Until July 1st

It's time for a little vacation. Normally, when I take a trip, it's somewhere there's an internet connection and I keep up to date on my notebook computer. Next week I won't have that option. I'll be out of touch with the electronic world temporarily, which is something we all should do every now and then.

I have back up standing by to provide OTC Journal editions should any companies provide breaking news worth covering. You won't be left in the dark if any of the featured companies deliver noteworthy news.

However, there won't be anyone around to reply to questions at editor@otcjournal.com, or post and reply to questions or comments in the BLOG. The intermittent daily market reviews will not be posted in the BLOG either.

I will return and be back in the saddle on July 1st.

Upon my return, we will be very close to rolling out an entirely new OTC Journal web site. It will have much easier navigation features, and a lot more useful content. I just got done filming 18 two minute video clips on investing I hope you will enjoy and find helpful.
 

The market rolled over big time and Friday, much to my chagrin. For those who have been following my "theme" trade on being short the NDX (NASDAQ 100), you might have read in Thursday's BLOG that I closed out both my long position in QID (a bet the market is going down), and my put options on the QQQQs- a riskier version of the QID trade. I netted about $5k, but left a lot of money on the table after Friday's action. I had a nice profit, and chose to lock it in because I won't be able to monitor the trades over the next week.

If you took my advice, and are still in this trade, it might not be a bad idea to partially or fully close it out on Monday. I have been discussing the March to May rebound in the markets for a month now, and the correction has come to fruition.

The NDX has held up far better than either the S&P or the DOW- it is riding the coattails of stalwart super stars RIMM and AAPL. These are big momentum stocks right now, and are carrying this index.

Against a backdrop of nearly certain recession and oil rising at $10 a barrel per month, I knew the two month rally needed a corrective phase. We're in it right now.

1910 is an interesting number for the NDX- I believe if it collapses much below that level, 1817 becomes a downside target. If it holds in here, the correction may have run its course. In either case, after Friday's drubbing on options expiration day, a bounce is probably in the cards.

That's why I believe it's probably a good idea to take some or all of your profits off the table, and reload on a bounce. If the market can work its way higher for 2 or 3 days, jump back into that short and wait for another bad news day.

There's some thoughts for trading in my absence. You are on your own until July 1st. Good luck.
 

I want to review a few of our worthy micro situations before I head out of town. Overall, you need to recognize we are in the teeth of the summer doldrums already, and as such we can expect low volume pull backs in an atmosphere of general malaise.

I think sector selection is really prevalent this year, and the stock market is now completely energy obsessed. A couple of the ideas we have featured are dependent on US consumers to generate business, and there is little interest in those stocks right now regardless of corporate performance. Investors just don't think Americans can afford to buy anything discretionary right now.

Here's a quick review of a few noteworthy ideas:

• eFoodSafety (OTC BB: EFSF): EFSF fell below the $.10 mark on Friday for the first time in its trading history. I suspected the stock was headed for trouble technically once it fell below the $.15 mark. I have been cautioning investors who weren't long term this pullback could be in the cards. This company has the unfortunate roll of selling discretionary health related products to US consumers, and the market just hates those kinds of stocks right now. The transition to the Direct Response marketing program doesn't seem to be taking off in the short term based on rhetoric out of the company, which is further exacerbating investor frustration. I think this one is getting into really oversold territory, a could turn into a fantastic mid summer buy for a big rebound before the end of the year. The company is not doing as poorly as the market would have you believe based on the way the stock is behaving.
• Spicy Pickle (OTC BB: SPKL): This is another stock going through a low volume pull back phase. Not much new money flowing into the stock, but shareholders are loyal and there's not a lot for sale.  This rapidly growing fast casual restaurant chain also sells a consumer discretionary product, so the market has little interest. Last week the company eclipsed the 41 store mark, and there are 90 more stores committed by franchisees over the coming years, with a number under construction right now. Their real estate department is looking for locations in 10 different states, and the company is going to continue expanding for some time to come. There are some initiatives in the pipeline which would accelerate their growth quite rapidly, so fireworks could be in the offing. I still hold an enormous position in this stock, and haven't done a trade in a month. When the market turns its attention back to these kinds of stocks, I believe it will go on to make a new high.
• PhotoChannel Networks (OTC BB: PNWIF): Keeping my fingers crossed a NASDAQ listing is in the cards for this company. Their Costco service is underway, and early whisper numbers are off the charts. Another consumer discretionary which I believe is close to starting on its next leg up. Numbers in successive quarters should now skyrocket. I'd like to see it back over $4 to maximize the NASDAQ listing possibilities, but I can't control it.
• Platina Energy (OTC BB: PLTG): We're off to a strong start with this new idea. Friday, the stock traded over 5 million shares, which was the highest volume day in its history. Early buyers were able to jump on the stock in the $.13 to $.14 range, and the stock closed at $.155. This response is a loud and clear signal about what people are looking for, and I have some energy related ideas in the pipeline. There's more exciting stuff coming on this one, so stand by. You might get some coverage on PLTG in my absence.
• Nighthawk (OTC BB: NIHK): I am informed the recent trade show where the company showed the hi-def hospitality industry cable box went extremely well. I look for more big increases in sales and much better margins. With a little news flow things could really pick up for NIHK shareholders. The stock seems ready.

I have found over the years that seasonally, the best time of year to bargain hunt is about the end of July. These stocks drift down on light volume, but rebound quite easily when buyers rematerialize. If you have the intestinal fortitude and capital to accumulate in mid summer when it's all doom and gloom for these stocks, you can often reward your courageous acts by taking some very prolific profits in the Holiday Season. 

This year the rebound could be very pronounced. The market priced in a recession in Q1, and the economists are just getting around to admitting we are actually in a recession. Anyone in the US who has bought food or gas in the last 3 months can tell you we are in a recession. By the time the economists tell you the recession is over, the market will have priced in a return to normal growth months before. Oil won't continue to go up $10 per month forever, and the economy will adjust to the new "Energy Reality" in reasonably short order.

Decide which ones are your favorites, and get ready to grab a bargain in the middle of the summer. 

Back after July 1st.

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