To OTC Journal Members:
 

The Large Caps Finally Break Down

Large cap tech stocks broke down this past week. Earnings warnings, coupled with spiking oil prices and cooling employment numbers did the trick. The semi conductor index broke its recent support line, taking large technology names down with it.

Yahoo (NASDAQ: YHOO) had made a 76% run from March until last week. The company delivered strong numbers, and the stock got clobbered. The move up took YHOO from $21 to $37. It ended the week at $30, a nearly perfect 50% retracement in one day. The company failed to deliver on the high end of the "whisper number".

Large cap software stocks also took it on the chin amidst a number of high profile earnings warnings.

Despite the poor performance in the large cap technology sector, there was little or no selling in the small and microcap stocks. The reason is simple: These stocks already sold off. They corrected during the May/June sell off. Their large cap brethren simply caught up with them this past week.

Just as the small caps led on the way up and the way down, they should also lead on the way back up again. Technically, we are setting up for continued grinding throughout the summer, which should give way to a red hot last quarter. Companies are still delivering outstanding results, and it will eventually be reflected in their stock prices. 

Here's news on one of our favorites which is riding a tidal wave of growth:
 

NeWave (OTC BB: NWAV) Continues to Ride a Huge Wave: Delivers Another Record Month

I visited NeWave at the end of May, and was astounded at the sheer level of activity. NeWave's turn key solution for allowing people to set up their own business on the internet has hit a sweet spot with consumers, and people are jumping on the bandwagon. Their phones ring about 4,000 per day, the majority of calls coming from people looking to get started.

For a mere $29.95 per month, you can create your own ecommerce web site. This is the most affordable and user friendly solution available to consumers.

The company was a start up last last August, and has been riding a monster wave ever since. As I reported last month, NeWave delivered $1.05 million in revenues in March quarter with 90% gross margins. In May, NeWave reported $600,000 in revenues, which had them on a clip to deliver $1.8 million in the June quarter.

I was concerned they would not be able to maintain their momentum during the month of June. The company moved to a much larger and more efficient space, and the move did not go smoothly. They had some phone switch problems leading to a number of delays. I expect expenses will be a little higher than normal due to the costs associated with moving.

However, yesterday after the market closed, I learned NeWave did not disappoint in June. NeWave delivered another record month, coming in with a breathtaking $740,000 in revenues.

The company has now doubled its revenue run rate over the past three months, implying an annualized growth rate of 1500%. If the company continues to double its revenues every quarter as it has done from March to June, NeWave could deliver $15 million in revenues in 2004.

I believe this expectation is unreasonable. However, I do believe the company can continue to deliver $100,000 to $150,000 monthly incremental increases in revenue. 

Based on past performance, NeWave could achieve about $1.5 million in monthly revenues by year end. There will be seasonal slowing corresponding with holidays and other calendar events.

The stock has been grinding its way higher since the May/June correction in small and choppy increments. Volume has been light. 

You simply have to have faith. NeWave's growth rate, coupled with the high margin nature of their business, will bring market recognition sooner or later. You will also want to have accumulated your position when it happens so you can ride the wave of price appreciation when it hits.

If NeWave continues growing at its current clip, this company will eventually be valued at $100 million by the market. It is inevitable. This market valuation would put the stock in the $8 to $10 range as their are only 11 million shares issued and outstanding.

You have an extraordinary opportunity to accumulate before anyone knows about NeWave.

Here is the complete text of yesterday's release for your review:
 

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