To OTC Journal Members:
 

What A Week- OTC Journal Kicks Butt

What a fantastic week for the beleaguered bulls. Both the NASDAQ and the DOW have made roughly 10% moves in the last eight days, and bulls everywhere have renewed enthusiasm.

More importantly, the OTC Journal had a fantastic week for our members, as we notched several awesome trading ideas that could have put some serious money in your pocket if you acted on last weekend's edition. For the most part, we only cover ideas on the long side. We have had our fair share of major losers over the last 2 1/2 years, but it's weeks like this that make it fun and rewarding.

As our opening quote states, a diamond is just a lump of coal that's done its job. The last 2 1/2 years made us look like a lump of coal along with all of Wall Street, but lumps of coals become diamonds if they do their job over the long term. Stick with us- this past week you saw our potential to become a diamond once again.

Our October 12th edition from last weekend featured three trading ideas for a surging market, and all of them performed. The first, QLogic (NASDAQ: QLGC) was a huge winner. The earnings report which came out after the close on Wednesday was outstanding. The company announced operating profits of $.28 per share, $.04 above estimates. The company also announced a $100 million share buy back.

Based on today's closing price as measured from Monday's open, our idea on QLogic yielded a 33.5% gain. More importantly, if you had invested in either the Nov 20 or Nov 22.5 call options we suggested, you would have enjoyed a whopping 240% or 284% returns respectively. Certainly one of our best ideas in the four years we have been publishing.

Chip manufacturer Advanced Micro Devices (NYSE: AMD) also had a respectable week despite Intel's poor showing. Net gain on AMD for the week- 19%. This is one long term investors should look at once technology companies become growth companies again.

Telecommunications company Comverse Technologies (NASDAQ: CMVT) also rose with the rising tide, notching a respectable 5.6% gain over the course of the week.

All in all, one of our best editions in some time. Just when you least expect it, the OTC Journal delivers awesome trading ideas.
 

Why The Bulls Are So Excited? - Where Do We Go From Here?

This past week's market action has the Bulls more excited than any time since the Bear took over. Bulls argue this rally is different than other past Bear Market relief rallies.

The downtrend line, depicted in red on the chart of the NASDAQ Composite, tells the Bullishness side of the story. As measured from the 1750 high this past May, the red line shows the peaks from which the market pulls back and continues on to lower lows. Bulls are quick to point out this week's action in the NASDAQ is the first break out above the downtrend line in six months, suggesting a major trend reversal may be in the cards.

The support/resistance levels as depicted on the chart in blue tell a different story. If the long term down trend is still in place, this indicator suggests the market has already rebounded to a reasonable level, and is now ready to resume its ongoing downtrend.

We believe the market will probably pull back over the next week, but there is a high probability the bottoming process may be nearing its long awaited end.

While it is interesting to speculate on technical market trends, a far more important dynamic has evolved over the past couple of weeks. We believe the market has arrived at a point where it is efficient for the first time in seven years.

In the latter half of the 90's nearly all technology stocks rose in price regardless of company performance. Over the past 2 1/2 years nearly all technology stocks have fallen with no regard for corporate performance. This is characteristic of an inefficient market both to the upside and the downside.

This past week the market was very efficient for the first time in years. On Monday after the close, Johnson & Johnson, GM, and Citigrup all reported strong earnings. All three were up strongly on Tuesday and closed much higher for the week.

On Tuesday after the close, tech bellwether Intel announced disappointing earnings, and the stock sold off big this week.

Wednesday after the close IBM reported strong earnings along with OTC Journal feature QLogic, and both stocks traded extremely well after the news. Even competitors within the same industry are now trading up and down based on earnings report. For example, Nokia was up big this week on strong earnings, while Motorola got killed on weak earnings.

Therefore, when we say the market is efficient, we mean stocks are going up and down based on corporate performance, not investor sentiment. This is the first real sign the bottoming process may be nearing its end. With 90% of earnings reports coming in equal to or better than expected, a bias to the upside is likely in an efficient market. More on the subject from the OTC Journal as evidence develops. Next week will be critical.
 

Calypte Biomed (OTC BB: CALY)- Also Turns In An Impressive Week

Calypte had a great week on the heels of the most important news in the company's history since getting the FDA Approval for its urine based HIV test. The stock had a huge day on Wednesday, trading the highest volume (9.4 million) this year and the second highest volume in its history.

As highlighted in our October 15th coverage of the news on the Chinese contract, we believe a trend reversal has also occurred in this stock. As you can see from the chart, the stock finally broke above the downtrend line as measured from early August. 

Despite a slew of positive developments towards the end of the summer, the stock continued trending down in conjunction with five separate issuances of stock by the company totaling 15 million shares. Most shares were issued during the month of September, and all were free trading and issued at a discount to the prevailing market- hence an excess supply of stock and a decreasing price.

Management has informed the editors of the OTC Journal it will not be drawing down on its equity line any longer as the recent contract signing is providing much needed capital the best way possible- through sales.

The stock appreciated rapidly from $.08 to $.13. Therefore, a pull back to 50% of the recent gain, or about $.105 would be the ideal buy level. The close of $.12 is slightly above this level. If you wait for a pullback you risk the possibility another major press release could drive the stock higher. 

If the company chooses to continue drawing down on its equity line despite promises to the contrary, the stock will trade poorly again. Time will tell on CALY, but we could be destined for further appreciation from today's prices as the company continues to gain momentum. Next Wednesday morning Calypte will host an earnings conference call at 11:00 Eastern, 8:00 Pacific. All interested parties should budget the time to listen. More on this in Tuesday's edition.

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MarketByte LLC has been paid a fee of 250,000 free trading shares of Calypte common stock by First Stage Capital for coverage of Calypte Biomed. On August 12, 2002, MarketByte LLC entered into an agreement directly with Calypte Biomed to continue coverage of the company through October 31, 2002. Calypte Biomed has paid $25,000 cash as compensation, and an additional 300,000 shares of free trading stock were paid by a third party on behalf of the company. Please review our policy on selling shares found in our Mission Statement on our home page.

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