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Vringo (AMEX: VRNG) Sets Up Perfectly

I'm sticking with my original forecast. Vringo, the video ring tone company, is going back to it's IPO price of $3.60. Not in a straight line, but I believe it's going there. This is a company that suffered from what I like to call the "Awesome Burden of Permanent Potential"- until recently.

The company is all of a sudden delivering and starting to shake off that burden. The first big step- the deal in India that puts their technology in potentially 500 million cell phones using 15 different cellular carriers. This was the "Tipping Point" for the stock.

A stock that hadn't traded any volume in months doesn't just go straight to the target price. There's a technical process of running up, backing up, filling, and heading up again until the impatient sellers are done.

One of the most powerful technical indicators for a stock that' in the early stages of an up trend is known as "Filling the Gap".

A gap is formed when a stock closes at a certain level, and reopens much higher or lower, creating an empty spot in the chart. The "Gaps" are like vacuums in nature, and nature hates a vacuum. Nature does everything it can do to fill a vacuum.

When you see a Gap in a chart, many times the stock will eventually come back and fill that gap by covering the space during trading. It just happens time and time again. And, if you are clever enough to notice, when a stock fills the gap, it's a great time to jump in. Most of the time, the stock turns right around and heads back up. I don't know how to explain it other than to say it's just nature, and it happens time and time again.

Today, just before the market opened, there was a news release highlighting a White Paper describing the size of the global mobile video market. Good stuff, but not the real reason to pounce on this stock today. The real reason- yesterday, the stock "Filled the Gap".

This is a pretty detailed chart I've prepared because it's important you understand this concept. When I first wrote about this company earlier in the month, the stock gapped up. On 4/29 VRNG closed at $1.67. The next day, VRNG reopened at $1.80 and never looked back- until yesterday.

From $1.80, VRNG clipped right up to a high of $2.65- that's a 58.6% move in 7 trading days.

As is inevitable with any stock that has woken up after a Rip Van Winkle type slumber, it takes a while for everything to run on all 8 cylinders.

I've been waiting and hoping for this one to come back and fill that gap, and it has. If you made a nice trade the first time around, or if you decided you like this story but missed the first run, you have been given a deja vu gift.

As you can see, yesterday when the stock filled the gap, it traded straight back up and closed on the high end of the bar. This is a pattern you see repeated many times over, and it's pretty tried and true. The stock fills the gap briefly, and then simply bounces and heads back up.

It's impossible to predict where the extremes will be for the foreseeable future, but I'll bet for the next year, the lows will get higher, and the highs will get higher for VRNG.

If you liked this idea the first time around, and either missed the move or made a nice profit, you've been given another chance. I'll bet by the time you read this, the stock is already having a decent day.

Don't miss the next 56% move. Do yourself a favor and use Nature to your advantage. The VRNG reboot. A little more backing and filling and a little more positive news, and this one is off to the races.

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