HESG Gaps Open- Be Patient

I was concerned about the lack of supply on the offer side of the market at yesterday’s close, and the market makers have taken advantage of the situation.

In yesterday’s edition, my advice was to put in a limit order at $.75. The stock closed at $.72 yesterday, and reopened this morning at $.81- that’s a 12.5% gap in the price.

I don’t like gaps at the open. Over 50% of the time, the gap gets filled. Gaps are like a vacuum in nature, and nature wants to fill a gap.

You can plainly see from the chart the stock has gapped open a described above.

Typically, in a gap situation like this, the market makers come to work in the AM and find dozens of new market orders on their desks. They buy out the existing offers for their own accounts, and then short the stock to market orders, with the intent of buying back when the buying is exhausted at lower levels, and scalping a few cents for their trading accounts.

In the case of a small stock like this, it is always best to stick with your initial maximum limit price. I advised $.75, and I am sticking to it. If you paid north of $.80, you might have to watch the stock trade down a little before it trades back up.

Over the long term, I doesn’t mean much. However, maximizing your trading strategies is always wise. Keep your limit order of $.75 in place for a couple of days and see if it gets filled. With every Wall Street fund manager turning into a weatherman these days, we should have a chance to reload at the $.75 level.

Datascension Has Big Week

DSEN has enjoyed a strong week. Late Tuesday and first thing Wednesday morning you could have bought the stock in the $.30 to $.32 range.

As I write today’s BLOG, the stock is trading in the $.40 range, for a solid 33% gain over the past two days.

The OTC Journal brought the value and quiet trading to everyone’s attention, and investors responded.

The stock has only traded about 600,00 shares this week, yet it has moved up by 33%. This simply reinforces my view that many of these oversold microcapscan bounce for big short term gains on relatively light volume.

For the time being, I would hold off on jumping in. In the normal cycles of trading, the stock is now entitled to pull back a little as short term traders lock in profits. It is likely the stock could be accumulated a little cheaper in the coming weeks- perhaps the $.34 to $.36 range.

On the other side of the coin, I wouldn’t be in any big rush to sell either, even if you bought in the $.30 range. The stock has the potential to go much higher over the next several months. Simply be prepared for the possiblity of a pullback.

NeWave’s New Initiative Starting To Pay Off

NWWV was out with some very promising news yesterday, and I thought it might make some sense to review current events at the company and take a look at what could happen through the remainder of the year.

The company delivered a 400% growth rate over the past two years, but since peaking in April with $1 million in revenues for the month, the growth rate has slowed and the stock took iton the chin in the Spring/Summer sell off.

The company is now 100% focused on turning the corner to profitability. They hope to accomplish this by implementing more cost effective strategies for acquiring new customers while lowering overhead at the same time.

To accomplish this task they have closed several expansion subsidiaries, and are concentrating solely on positive cash flow from their core business.

Auctionliquidators, while a viable offshoot of their business, was looking like it would take 2 years to turn profitable. It has been shut down.

In the meantime, a recent online initiative which requires no human capital investment is taking off. As disclosed in yesterday’s press release, their online initiative landed 2900 new customers in August, up from 295 in July when the program was launched. These new customers signed up with no customer service interface, thereby lowering the overhead.

NWWV has been under signficant pressure this past year. While sales growth has slowed from the first two years, the company does continue to grow and there is a major focus on reducing costs.

The nationwide infomercial roll out with Bob Eubanks is still scheduled for this Fall, and could re-invigorate the company’s growth.

In the meantime, I believe the drop in the price of the stock is more related to the Spring/Summer sell off and the market’s 2005 obsession with energy stocks.

The stock is very cheap right now, which sets it up for a big rebound in the Fall. High energy prices will cause people to seek additional sources of income, which plays right into their business model.

The stock has a lot of upside from current levels for a trade this year. Watch the stock rebound as they get back on track.

American Water Finally Flowing Back Uphill

American Water Star received a serious jolt of activity and price appreciation in today’s trading activity. The company was out with news pre – open that it was shipping water to FEMA for the emergency relief efforts for Katrina. In an earlier press release, AMW stated it was running as full capacity to ship water in it’s collapsable pouches to aid the relief effort.

As a result of today’s news, shareholders are being treated to much needed relief. The stock is trading at about the $.40 level, up about 60% from the levels it has been camped at for the entire summer.

I don’t have any information from the company, but the press releases bring up some interesting possibilities. According to press release 2, the company has orders to work round the clock. It does not specify if they are actually working round the clock right now.

Plants mentioned are: “Phoenix, Jacksonville, Magnolia and Kentwood. Estimated production capabilities are 125 truckloads of water per day, seven days per week. ”

The language is interesting. If they are indeed shipping 125 truckloads of water daily, it’s a substantial amount of revenue. Hawaiin Tropic was about $15,000 per truckload in revs. If water is 1/3 that, it translates to $625,000 per day in revenues, or $228 million in annual revenues.

In an early press release, AMW stated it was shipping as much water as it could in pouches. However, if memory serves, the pouch packaging business was to be spun out of the parent company, and if you weren’t a shareholder before about March of ’04, the revenues won’t flow to the company you own.

With no specific revenue numbers in the news releases, it’s tough to predict what this all means. The language is a little vague, but putting a pencil to 125 truckloads of water daily certainly puts a charge back in the possibility.

Because of the many past undelivered promises and anecdotal evidence of deep rooted problems, I am not prepared to say this stock is a buy. I need a lot more information and will make an effort to get it over the next couple of days.

For those who have given up on this company due to its past history, this dramatic surge in price and volume could be viewed as a selling opportunity. Perhaps a partial sale is in order. That way, you will have some money off the table, and still own the stock if this is the real turn around event. As more information comes, you can always buy it back if it is highly favorable.