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OTC Journal Members:
Announcement: Trading Alert Next Week
We're looking at a situation which
may turn into a Trading Alert on Tuesday or Wednesday afternoon
next week. Before deciding if you want to participate, please read the
Journal's section on Trading
Alerts found on the left hand menu bar of our home page. For a
Track Record of former Trading Alerts, Click
Keep an eye on your inbox for an
exciting opportunity in the middle of next week.
Rally- Is It Possible?
The market was up this past week
for the first time in several months. All the major averages posted solid
gains, taking investors by surprise. Some attributed this past week's performance
to expectations of an interest rate cut when the FED meets on Wednesday.
This seems highly unlikely, as 11 interest rate cuts last year didn't work.
Others attributed this week's performance
to the absence of sellers. Overseas investors have been liquidating US
equities for months, and they seem to have run out of stock to sell. Short
sellers were conspicuous in their absence. They're probably all buying
new mansions in the Hamptons and jetting around the world enjoying the
billions in profits they have accumulated in the past 2 1/2 years. Wall
Street pays off when you're right.
Despite the typical August seasonal
lack of interest and pervasive doom and gloom, this chart of the NASDAQ
Composite suggests we may be in for a summer relief rally.
This past week the NASDAQ broke up
its' downtrend line (shown in red) for the first time since the sell off
steepened in mid May, leading to three months of bloodletting on all the
In addition, the NASDAQ has recently
put in a double bottom. The second bottom was slightly higher than the
first. Technicians will tell you this is a bullish indicator in the short
As long as the NASDAQ stays above
the red line, there is a possibility of temporary rebound into the 1450
area. Of course, this will not change the long term downtrend. We believe
the trend will continue until October or November, when a new, very weak,
and very young Bull will be born.
Here are a couple of oversold trading
ideas which may yield a short term profit if the market puts in a relief
rally. This scenario may not play out, so use a stop loss as an insurance
policy against a new leg down.
Flextronics is probably the
largest outsourced off shore manufacturer of electronic devices. OEM (Original
Equipment Manufacturers) outsource their production to this company.
Formerly a profit powerhouse, the
company's fortunes have declined along with the entire technology industry,
and they are losing money at this point in time. However, the value is
compelling at this level.
Annual sales run about $13 billion.
At this price, the company is trading with a $4.2 billion market cap, or
about 1/3 of sales. It is also trading at less than book value (liquidation
value), which is about $8.62 per share.
The chart suggests a slight uptrend
started in late June when the stock hit it's all time low of $6. If the
market improves, this one may want to go back an fill the gap from early
June, suggesting a good target price might be $12.
However, stay light on your feet.
The company's fortunes are declining. A stop loss based on your risk tolerance
is highly recommended.
Corporation (NASDAQ: NVDA)
Here's a stock traders have taken
out to the woodshed and beaten to death. The company designs and manufactures
3-D graphics processors and graphics processing units.
The company has a book value of $5.72,
$5.45 per share in cash, and at current levels trades with a PE ratio of
about 7. This company had an adequate June quarter, but announced the future
In favorable market conditions this
stock could rebound into the middle of the blue bands. This shows the average
price since the stock began it current leg down, toppling from $24 to just
above $9 in less than a month.
Most of the analyst community downgraded
this stock once it reached the $9 level, which is a bullish sign as far
as we are concerned.
Again, if you decide to roll the
dice, a stop loss to minimize the risk is strongly suggested.
Power Systems (AMEX: EGY) Back in the News
Energy Power Systems, one
of our long term profiles, was back in the news for the first time in months
yesterday morning. This stock was a big winner for us in 2001, yielding
a profit of 60% to 70% for our members who sold towards the end of the
This year it has been all down hill
for no apparent reason other than lack of news and horrendous market conditions.
The company has not been proactively out in the investment community, choosing
not to swim against the tide. They are waiting for calmer waters before
Yesterday, just before the market
opened, Energy Power made it first very positive announcement in
some time. The company announced its Offshore and Engineering Division
had been awarded $6.2 million in contracts by major energy
companies operating in Atlantic Canada. Click
Here to read the entire text of the news release.
We are expecting Energy Power
to make a come back this Fall, predicated on the possibility of major new
business. Stay tuned for more developments. The stock is oversold at current
levels, and the company is doing well.
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