To OTC Journal Members: 
 

The Biotech Buzz Rerun

I looked for some recent small stock biotech winners. Check out the action in ECTE of late. $1.30 to $2.20 this month on increasing volume as the stock climbs the charts. There's a lot of action in these small biotechs right now.

Do you believe in reincarnation? In the stock market, it happens all the time. Stocks given up for dead live again. And, sometimes the ones who were the biggest winners, become the biggest losers, and then go on in their next lifetime to give investors the same ride all over again. Much like one of my favorite movies- The Godfather- The sequel was as good if not better than the first version.

Next week's idea is just that- a reincarnated biotech company. The reincarnation is just starting, the technology received nationwide coverage in my high profile media outlets, and most importantly the stock is cheap, cheap, cheap. Want to see the poster child of given up for dead and reincarnated in the biotech world? Check out DNDN (Dendreon). That stock was under $3 last March. Today? You guessed it- $30. 

Some of you sleuths are going to love this. This idea- this stock- all it did was run from $1.80 to $24 over the course of about 4 months. I won't tell you when, but I will tell you the move was fueled by a fascination with their technology that was covered in many nationwide magazines and news outlets. It's similar to DNDN's therapy.

It's worth a mention again. I was very strong last year on picking up on a couple of small biotech trading ideas. 

Last year I brought you Cel Sci (AMEX: CVM) at $.59 on June 13th. Since that day, the stock has been as high as $1.88 (where I recommended a sell), and currently around $1. Also, penny stock Biocurex (OTC BB: BOCX) was featured at $.07 on September 9. Since that day, the stock has seen a high of $.28, and is currently at $.11.

Bottom to top: 206% on CVM, 300% on BOCX.

Next week's idea is going to be suggested as what we call a "swing trade". One to two months will be the suggested time frame for a big move. Stand by- Wednesday or Thursday.
 

The Small Stock Divergence

Wall Street considers the Russell 2000 as the best gauge of interest in small stocks. The Russell was absolutely annihilated in the '08;'09 global meltdown as the smaller companies tend to take the brunt of the selling sooner. These are considered the high "BETA" stocks.

If you don't know the term BETA - here's what it means. It's a measure of volatility that wheels off the S&P 500. The S&P 500 has a BETA of 1. That's the benchmark. A stock with a BETA of 2 would simply be twice as volatile as the S&P 500. Hence the term "High Beta" stock. Many of the stocks in the Russell 2000 tend to have betas of 3 to 10- these are the movers, both up and down.

Of note this past week is the breakout of the Russell 2000. In Q2 and Q3 of '09, small stocks were all the rage. In Q4 of '09, the larger caps seemed to get the majority of market interest.

Since the first of the year, those inhabitants of the Russell 2000 have broken of the '09 resistance range, and appear to be the area of greatest interest in the market. 

Technically, the market is like everything else in life. Persistence breaks down resistance. Look at the Russell 2000. It banged up against 650 twice in Q4'09- September and October.

The third try was the charm. A clean break over 627 in January, which makes it the best performing major index so far in 2010. After a brief rest, small stocks are leading the pack again.

The market took a bit of a low volume beating yesterday on options expiration. The Russell 2000 could want to go back and test the 650 resistance number. If that happens and 627 holds (just 10 more ticks), load up on your favorites.

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