To OTC Journal Members:
 

Feeling WhipSawed?

Dictionary.com defines whipsawed as "To cause to move or alternate rapidly in contrasting directions". For market investors, the term whipsawed generally refers to a very volatile market environment when it seems you are always on the wrong side of trades. I have been mostly long the market through QQQQ calls for the last three weeks. I was down as much as $15,000 on a $25,000 investment at one point, and the QQQQs had traded below my pre set stop loss. However, I knew the market was absurdly oversold and due to bounce. So, rather than allow the market to perform a black magic act and cut my money in half before my very eyes, I decided to hold out and was rewarded with the big bounce on Thursday. I'm not even yet, but hoping to get there next week.

In the last five weeks we have had a global equity melt down, the likes of which I can't recall ever experiencing. One author I follow called it a "Giant Global Reboot". I like to call this a CAAC market (Cash at any Cost).

In the short term this is quite painful, but it sets us up for what I believe will be an excellent market environment in Q4 '06 and Q1 '07. Between now and then I believe we will have a pretty good rebound into mid July, and choppy market with a downside bias into October, and then free sailing for the next six months. 

If you think the melt down was about higher interest rates, you would be wrong. It's about liquidity drying up world wide and commodity prices soaring into the stratosphere (see gold). It's mostly about fears associated with the recent round of "Fed Speak". The market now believes there is a chance the Fed will become overzealous and throw us into a recession. One more 1/4 point and done would be just what the doctor ordered for the market. 

While I didn't anticipate a sell off of this magnitude, loyal readers should give me some credit for anticipating a short term market related problem when I published an edition entitled "Don't Say You Weren't Warned" on May 21st. I suggested adhering to the SSLs if you were a trader. Every OTC Journal idea is now trading below its SSL- USEI being the last one to succumb this past week.

I suspect the short term bottom has been established, and it's a good time to do a little bargain hunting, especially if you liquidated some positions and have the cash. 

Here are my bottom fishing choices of OTC Journal ideas, starting with the best in my opinion:

• NeWave (OTC BB: NWWV): On March 21st this stock traded as low as $.17. Since then, the high print has been $.58. That's more than a triple in the last 2 1/2 months. The stock has pulled back into the high $.40's. The company's Q1 was extraordinary, nearing quadrupling last year's sales and turning profitable for the first time in corporate history. Anecdotally, I hear Q2 is going to blow the doors off Q1, but time will tell for sure. The company is changing names to Commerce Planet in the next ten days and will change symbols as well. It's a new day and a new company. Looking for $1 on the stock this year if the corporate momentum continues.
• US Energy (OTC BB: USEI): Many believe the best time to own a technology microcap company is when it starts getting commercial acceptance and their first orders from proprietary technology. If you like that theme, you have to love US Energy. It is absolutely the right idea at the right time. They have technology that turns diesel engines into hybrids that burn diesel and natural gas concurrently. Net result- huge fuel cost savings with no loss of performance. They recently got their first major order for retrofit kits from the Far East (1500), and the first OEM contract with General Motors. They are also completing two acquisitions, both with significant sales and profits. This was the last stock to give up in the down draft, and did so on very light volume. Love it for a rebound.
• Dexcom (NASDAQ: DXCM): My number one best call of 2006. For those who followed the idea, you know I recommended it at $16 on January 28th. The theme- hold the stock until they get their revolutionary wireless blood glucose monitoring device approved by the FDA, and sell into surging volume on the event. If you followed my advice, you sold the stock on March 21st in the $23 to $24 range. Personally, I made about $60k on the idea. The momentum players have absolutely decimated this stock in the last week, taking it from $21.50 to $13.50 in six trading days. Absurdly oversold and probably good for a $2 to $3 bounce. I will probably be buying some on Monday.
• On the biotech side, I believe our three offerings are all oversold: ACTC, KAL, and MDSM- however, I don't believe they will rebound as quickly as the three listed above. 

If you are a US Energy fan, here's some important news you will want to act on. The company will be holding an investor conference call on Thursday, and releasing number forecasts for Q3 and Q4 of '06. This will really help gives us a handle on where this one could end up. Put it on your calendar and check it out.

Here is the press release which contains the conference call instructions:
 

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