To OTC Journal Members: 

My new subscription based China site is now ready for Prime Time. Today is the first day we're accepting subscribers, so you have the opportunity to be a founding member. I'll publish my first flash alert Monday, and then off we go. More on this below. First- a little recap.
 

What A Short Squeeze Looks Like

It's about as exciting as it gets right now. I hung in there on the China theme in the dark days of May through September, and the whole sector is just tearing up the charts right now. The smaller illiquid names haven't caught fire yet, but they will in short order. I believe it's going to be extremely fertile profit ground through the end of this year. There's five years of growth and superior price performance ahead, but no major corrections this year in my view.

Go back and take a look at my Top 10 list from the June 2nd edition. Some of the names there are really starting to rocket- with CCME- my #1 pick- making new highs everyday. Want to see what a short squeeze looks like? Here you go.

It was my #1 pick in June at about $13. I bought it at $12.75, and I also own the Dec $7.50 calls at $3.90. I sat in this stock all summer and watched it get hammered as the short interest grew larger and larger. I watched breathtaking numbers come out in mid August, and when the stock blipped up and retreated, I wondered if short sellers knew something I didn't.

Well, it now appears the shorts had this one wrong and the stock is headed north everyday. A new all time high Friday. The management's move earlier this week to sell a small part of their holdings in a private transaction with their early financiers was the nail in the coffin lid for shorts. The "perceived" excess supply disappeared, and no one seems to be calling their numbers fraudulent. 

Check out this table. Notice how the short interest was only about 1 million shares in mid June, and by mid September it was 4.4 million shares. That's quite a build up. When we see the October 1st number, I'll bet it will be lower, and I'll bet the Oct 15th number is much lower.

Here's what a short squeeze looks like. The stock is literally melting up everyday. Friday, it traded up the highest percentage one day move (15.55%) on the second highest volume day in the stock's history. It was great if you're long and you believed when no one else did.

When you see a stock trade up like this day after day, it's not because investors are buying this stock. It's because short sellers are forced to buy this stock. No rational investor piles into a streaking stock like this- the shorts are being bought in, and killed. The short side of all the China stocks were pretty crowded trades, and those short sellers can't all close out at once. 

Friday's closing price for CCME was $16.20- a little south of the all time high of $16.60 set Friday as well. I believe the stock is going to $25, but at some point the shorts have to be done buying, and the stock will then trade a bit more rationally. A pullback is inevitable. When it does pull back, we'll have another look. I don't know how high it's going on this run, but I wouldn't jump in now. 

I had planned to hold both my common and options through to the earnings release, but I might have to rethink that strategy if it climbs like this a bit more. When it trades high volume with no further upside movement in the stock, it will be time to trade out. To be advised when it happens, you'll have to be a subscriber to the new publication. Here's how:
 

There's Plenty More: EmergingChinaStocks.com

Lest you think CCME is an isolated incident, think again. I'll find more CCME's for you. There are still enormous short positions in China stocks out there. The commodity stocks are starting to break out. I personally own shares in three China based pork producers- one of them is featured on the new site. The price of the "Other White Meat" has been climbing all summer in China, and the stocks have moved of late.

Friday I saw evidence of the Coal producers starting to break out, and now I own two of them. One is featured on the new site, and you should be looking at it for Monday.

Here's how you enroll. Start by visiting the new site. Here's the Web Address:

The site is live today and accepting first subscribers. Just go there and click on Subscribe Now. I'll publish the first Flash Alert on Monday- an overview of what's going on in the Coal stocks, and a couple of names you need to own immediately. You'll find one of them covered in the Small To Mid Cap Section of the recommendations. If you like it, pick it up Monday at the open. The Chairman of this particular company bought 500,000 shares in the open market this summer. This idea alone will be worth subscribing.

There's a couple more things you need to know about the new service. First of all, you can use it risk free. As I've said, new subscribers will have a 2 week free trial. Once you input your credit card number you won't be billed for two weeks. Call the toll free number anytime up to two weeks, and tell them you don't want it. You will never be billed. 

It runs about $1 per day, and there's no risk for 6 months. Here's what I mean. I'm allowing subscribers to withdraw for a full refund anytime in the first six months. If you don't feel it's worth it, just tell us, and we will refund all your money no questions asked. Also- when you sign up, you get two free reports, each with 3 stocks. 3 Power Stocks, and 3 Must Own Stocks. You'll see some familiar names in there.

The customer service toll free number is 888-656-3509. They can help you with anything, but give everyone a week or two to get up to speed. There isn't a lot of archive content on the site, but the stocks we chose on October 1st are all there. You should familiarize yourself with the portfolio, and decide if there's ideas you believe are money makers.

Of course- there is one SNAFU we discovered late on Friday. The site won't accept American Express- yet. We had to take an additional step to include it. It will be two more days before AMEX is good to go.

There's one more way to insure you get the information. With all the spam blockers out there, you are going to want to know when we publish. In order to insure you're looking we've set up a Twitter account. I'll Twitter you with a text message on your cell phone when it's time to check your inbox. Sign up at echinastocks on Twittter to be notified by text message.

Please get started with me right away. The China sector is going crazy, and there's plenty of money to be made the remainder of this year.

Disclosure: Long CCME and almost everything else on  www.emergingchinastocks.com. 

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