To OTC Journal Members:
 

Spicy Pickle - Take the Hint, & Some Profits

The longer I watch this trading idea progress, the more blown away I become. It's got the two things I like most in a small cap company... healthy underlying corporate growth, and a rising stock. We've got evidence of the former today. And as for the latter, well, the chart's red-hot run from 69 cents exactly a month ago to last week's high of $2.02 basically speaks for itself. That's almost a 200% move! I hope you locked in some gains between there and here. 

Of course I'm talking about Spicy Pickle (OTCBB: SPKL). This has just been a great small cap equity to own over the last four weeks...lots of good news, and good returns.

Today's news is simple enough - they opened two more stores last week. Add those to the two they opened two weeks ago, and the total number of units up and running now comes to 30. The company still plans on getting 10 more open by the end of the calendar year, and 50 more agreements have been signed.

So, the 'hint' in the title of today's write-up is this... this company is for real. The growth is for real too, and it's just the beginning. I think the stock is along for the ride.

Better still, with today's news not only are two more stores opened, but two more geographical markets are now exposed to the food - Hattiesburg, Mississippi, and Indianapolis, Indiana. In both areas, more franchises are on the way.

Looks like the word is out and spreading fast about how good the food is. I know I encouraged all of you to go try the food and see for yourself why this could make for such a great investment. Though many of you may have been geographically inhibited from doing it, I don't think many of you will be much longer. On the other hand, I don't know that the stock will wait for you to make your way into one of the restaurants.

Now look at the chart. This is one of the fastest movers I've seen in a while. I doubt anybody really expected SPKL to get this far as fast as it did, though I'm sure nobody was complaining. 

Here's the 'profit' innuendo mentioned in today's title - SPKL hit $2.02 last week. I also believe SPKL is worth every bit of $2.02. So why was I selling? I'll be blunt - I'm into stocks for the money. I hope you are too. We all had an opportunity to lock down a big gain on our Spicy Pickle shares, and anything above $2.00 for any stock is outstanding when it was trading at about 1/3 of that price a month ago. So, I pulled the trigger.

I don't want to get too philosophical about it, but sometimes being an investor makes the most sense, and sometimes being a trader makes the most sense. 'Wisdom' is knowing the difference, and it can be the difference between great results and just mediocre returns.

When I presented Spicy Pickle to you on September 22nd, it was based on its investment potential. I really do think SPKL should eventually be worth at least $2.00 based on its foreseeable growth plans (or worth even more beyond those plans). However, the company hasn't actually reached that endpoint yet. When they do, I suspect we'll see Spicy Pickle's shares at $2.00 or more. So, I still like that potential as a long-term investment.

But, if I can make money twice instead of just once on a stock, why wouldn't I? SPKL reached $2.00 last week - the target price I established a month ago. As a disciplined trader, I don't want to rationalize myself out of a good profit. I think Spicy Pickle shares were going higher based on pure momentum and hype this time around.

The next time around - once everyone catches their breath - I believe SPKL will appreciate based on the company's merits. It may take a little longer than the first time around, as investors mull it over. That's ok though.

So what might be a good entry level for the second time I become an owner? Without a lot of historical context for the chart, I think Fibonacci retracement lines offer the most help to that end.

A 38.2% retracement would put shares back at $1.43. That would be a healthy pullback (that nagging gap from the middle of last week was already closed today). A full 61.8% retracement would bring the stock back down to $1.06, and close the gap between $1.19 and $1.24 (from 10/10/07). I'd assess the situation around $1.43 with optimism, though I think I'd be an aggressive buyer around the $1.06 level...if we actually get there.

The gap from September 24th? Never say never, but I don't see that one getting filled at this point. If it does, I think it's an outright gift at that 71 cent level. However, I wouldn't plan on being that lucky. I'd be happy with either of the retracement levels mentioned above.
 

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