The Planet Falls Through All Levels of Resistance

Well, I hate to say it, but technically CPNE is a complete disaster, and this week’s action has swept away any vestiges of hope for a support level to appear. In short, I am now convinced it is impossible to call the bottom on this stock. In my view, this stock will continue to go down until it starts going up- and goes up, closing at higher levels, for a week or two in a row.

Here’s today’s chart:

cpne12.gif

The last level of technical resistance was $1.44. This is a pretty long term chart, measuring the performance of the stock week by week- not day by day.

The stock has fallen below the very long term weekly 61.8% retracement level, which means there is no end in sight to the fall off. Had the stock held in this area, it could have been a great inflection point for turning back up.

Fundamentally, I have no indication the company is not moving along nicely. Technically, I will no longer even attempt to guess where the bottom is.

If you have recently bought somewhere in here, I would just go ahead and sell it for a small loss, and wait for the bottom.

If you are holding it from higher levels, you have to decide if you want to hold your nose through the technical stench, and hope the company hasn’t fallen on undisclosed hard times, or just go ahead and sell. It’s your money, so the choice is yours. As I have stated, I have no indication the company is doing poorly.

If you’re looking for a culprit to explain the dramatic drop in the stock, a good guess is eFund. There are two main sellers in the recent registration statement- fund manager Jeffrey Feinberg is registering about 2 mllion shares, and eFund is registering about 7 million. Here’s the big difference- Feinberg has a cost basis of $1.90, eFund has a cost basically zero- they just helped put the company together over three years ago. My guess, eFund has figured out a way to pre-sell against their registered shares.
This is just a guess, but they are the only ones out there with enough size to hurt the market this badly and a low enough cost basis to make it pay off for them. Until there are some SEC filings from them, we won’t know.

In summary- I would not open new positions at this time until it is clear the stock has bottomed out. You have to decide what to do with your current position- the choice is yours. Only hold it if you are long term and aren’t going to watch the quote every day. I have no indication there is anything wrong at the company.

Sad, after this stock was so good to us for nine months, but that’s the stock market. I could have published a note saying the stock was even a better buy at these levels, but you read this content because I tell it like it is.

Comments, questions, and general complaints are welcome as always.

Nighthawk – Time To Reload?

NIHK is a fan favorite, and I know many of you have been waiting for an update, just itching to pull the trigger and reload after trading out at twice today’s price.

One thing I have learned over the years- The wonderful surge we had in NIHK comes along once or twice a year when technical conditions fall into place perfectly.

You always think the stock is ready to do it again right away- but guess what- it’s not going to. It’s going to take some time for forces to build up.

Another thing I’ve learned- when stocks run up, they run up higher than you ever expected. I never thought we’d see a $.24 print in this stock so soon. The stock was going up on momentum rather than merit, which is a good time to sell.

On the flip side, stocks generally go lower than you thought possible on a pullback, and that’s what I have been waiting for with NIHK. Looking to see where the bottom would be.

Lately there have been two kinds of sellers- some shares have been hitting the market from financiers- this will go on for some time as the company is not yet profitable and still needs to raise capital. The other kind of seller has been those who bought the stock on its way up in April, and is selling because the stock is down and not moving right now. If you have been following my counsel on this one, you should have been a seller when those goobers were buying at the top, and they are playing right into your hands- allowing you to accumulate while its cheap and no one wants it. It’s the best way to accumulate a microcap.

Now that I have watched NIHK for a few weeks, I believe it doesn’t want to trade much, if any, below $.10. Therefore, I believe it is time to jump back in and accumulate. Don’t do so if you think the stock is going back to $.24 tomorrow. It would take some big news for that to happen.

Here’s this morning’s chart, along with a couple of things I like about it:

nihk1.gif

The stock finally drifted back down to the $.10 level, traded a touch below, and bounced right back up. That’s the bottom I was looking for.

In the meantime, the daily volume has dried up considerably, suggesting those who bought too high have already thrown in the towel if they were going to, and their loss is your opportunity.

Today, pre open, NIHK announced another utility order. Slowly but surely their utility network is expanding, and the re orders are coming in on a more consistent basis, and in larger quantities. Some of these utilities are installing, then moving on to the next batch of installations. This is becoming almost like a recurring revenue model.

Recently, Mercedes Benz reordered after completing the first installation- it’s not really big, but it’s good sign their product can be adopted in other arenas.

There will be more fundamental information down the road. I still believe the company can hit the $2 to $2.5 million level this year without any really big deals, which would be at least a double over 2006. That’s why there isn’t a huge amount of risk in the $.10 range.

The upside and the next big run: when they deliver a really big deal, of which there are about 10 under consideration.

I like our chances, I just can’t say when. No need to pay more than $.11 at this point in time.

Comments and questions are welcome.

The Planet Implodes

CPNE is falling apart again today, and I just don’t know why investors would sell this stock at this price.

Actually, I do know. They are selling it because it is going down. Despite profit levels that suggest a $4 stock, institutional participation at the $9 million level at $1.90, and all the balance sheet improvements, CPNE is still under heavy distribution.

We are now flirting with my SSL level of $1.45- so once again, as is typical of the late spring and early summer, it is time to decide if you want to be a seller and move on, or become a long term investor.

I have watched about $100,000 in value erode of our corporate portfolio in the last few weeks, and a lot more from the January high of $3.43. Despite 20 years of grizzled veteran experience, stocks like this wear me out as much as anyone. In fact, this is far worse than a failed idea. It’s worse because the company succeeded- it’s simply a bad stock. When the companies fail you just sell and move on. No problem. It’s over. However, bad stocks can become good stocks a lot easier than bad companies can become good companies. We have every chance of heading in the right direction again.

I was talking with a good technician today who has been watching this one. He told me he was going to be a buyer today. He likes 61.8% retracements as I do, and he pointed out something I hadn’t caught.

Here’s today’s chart:

cpne2.gif
This is not a daily chart. It is a weekly chart going back to the stock’s all time low in December of ’05. CPNE traded to an all time low of $.16.

On a weekly basis, the stock has now given back almost exactly 61.8% of its entire gain from top to bottom. This is a pretty long term look, and the longer term, the more powerful and better predictor.

Also of note is the stock’s miserable perfomance over the last six weeks. Five of the last six weeks (as measured by the colored bars) have been down. That’s just abysmal.

Just as I suggested with TTGL a couple of weeks ago, you need to decide if you are long term and want to hold, or simply sell and move on. If you sell, you can always buy it back.

If you have decided to sell and move on, I would wait for a modest rebound. It’s hard to get a decent print when everyone else is selling.

I would be more inclined to buy right now. When these stocks make new lows they tend to blow everyone out and then reverse course when you least expect it.

I wouldn’t be surprised to see some sort of moderately negative announcement come out of the company, followed by a rally in the stock once everyone realizes the whole thing (whatever it is) has been blown out of proportion.

In the meantime, it has been painful to watch this one fall apart, but that’s the market.

I wonder how low the stock has to go for it to become irresitable to traders. We might be there now.

Comments and questions are welcome.

Planet Q1 Numbers- And The Beat Goes On

I spent some time today dissecting the Commerce Planet Q1 financial filing, and it seems like the company is full speed ahead. There are a couple of minor negatives, but on the whole it seems like this stock should be trading in the $4 range, yet it can even get through $2.

Here’s a few highlights I pulled out. First, on the Balance Sheet- which is the part that compares the company’s assets to their liabilities:

  • End of ’06: $3.6 million in cash; March of ’07: $5.4 million in cash (50% increase in three months)
  • End of ’06: $1.5 million in receivable; March of ’07: $2 million in receivables (33% increase)
  • End of ’06: $1.9 million in “other receivables”; End of March of ’07: $3.5 million in “other receivables” (these are some sort of credit card hold back). 84% increase
  • End of ’06: $7.2 million in Shareholders Equity; End of March of ’07: $10.7 million in Shareholders Equity (48.6% increase in three months).

All in all, on the balance sheet side, it really doesn’t get much better than this. This is truly outstanding performance all across the board, and I really can’t find anything about this performance that doesn’t suggest a much higher value for the company.

Now- let’s look at the Income Statement. This is the part where we see if they are making any money:

  • CPNE delivered $13.2 million in revenues, up 50% from Q4 in ’06. A huge gain.
  • Gross profits were $10.6 million- CPNE is delivering 80% gross margins
  • Net Income was $4.1 million pre tax, up 33% from last quarter
  • Net Profits were $3.6 million

So- now we come to an issue that could be interpreted as a negative. CPNE has run out of loss carry forwards, so they are now paying income taxes. $500k was set aside for taxes in Q1, taking the EPS down from $.10 to $.08.

On the stock buy back program- we can see the hard numbers on their level of commitment now. Nearly 300,000 shares were bought back in Q1- those shares are now retired and removed from the I&O.

On the flip side, the company issued 2.37 million shares to someone the filing describes as an “affiliate”- there is no other description to let us know what this award was all about. In another section it is noted the company issues 237,000 shares for services.

Net result: a 2.6 million share gain in the number of shares I&O. This is a minor negative, and I would like some disclosure on why and to whom they issued 2.37 million shares of stock.

The tax paying status explains why revenues were up 50%, but profits only up 33%. The company will now have to pay taxes on an ongoing basis- kind of a high class problem.

So, in review- here are your negatives- shares I&O, despite the buy back program, went up by 2.6 million.

Revenues went up 50%, while profits only went up 33%- primarily due to paying taxes as the company is out of loss carry forwards.

And, of course the biggest question remains- why does this stock continue to trade at such a lousy valuation relative to corporate performance? I wish I knew. We have already explored that issue in some depth, so I won’t go over it again.

Here’s the chart:

cpne11.gif

I threw in a couple of other indicators I know investors like- specifically the 50 day and 200 day moving averages.

In addition, I put in the long term 61.8% retracement line I used a couple of months back to suggest the stock was a buy at $1.60.

As you can see, $1.61 remains the long term 61.8% retracement level. The 200 day Moving Average is $1.66, and the 50 day is $1.97. This means the stock is in a long term uptrend, but a short term down trend.

If the stock were to eclipse the $1.97 level- which it tried to do today, it would signal it was in an uptrend both short and long term.

So- there’s the chart, and there’s the review of the financial filings. Fundamentally, it’s a very strong buy for long term investors. Technically, it’s neutral right now. If it gets some steam, the technical picture could change.

Comments and questions are welcome.

PhotoChannel Break Out- In Sympathy With Photobucket

Spring is busting out all over along with Photochannel. The stock broke a multi month downtrend or consolidation line yesterday, and is powering higher today- looking like it wants to head back to the all time high of $5 it hit in January.

Here’s the chart, showing the stock breaking out from its downtrend line:

pnwif1.gif

It’s almost not a downtrend- more like a period of sideways, low volume trading- a consolidation period of three months wherein the stock traded between $3.50 and $4.

Here’s the news that’s driving the stock higher:

Apparently, image storage site PhotoBucket is being purchased by NewsCorp (Rupert Murdoch) for between $250 million and $300 million.

PhotoBucket boasts 41 million registered users, up from 32 million at the end of last year and 2 million in 2004. It now hosts nearly 2.8 billion images on the site.

PhotoBucket has a different model than PhotoChannel. Photobucket provides hosting services for free, and generates revenues from advertising. PhotoChannel has a transaction based revenue model.

However, shares of PNWIF are trading up nicely in sympathy with the PhotoBucket buy out news. It gives you some idea of the potential value of these internet properties.

In the past I have predicted both PNWIF and CPNE would eventually graduate to senior exchanges. I believe, based on price, you will see PNWIF find its way to the NASDAQ sooner rather than later. An upgrade from the Bulletin Board to the NASDAQ would probably be good for another point on the stock.

PNWIF is probably going a lot higher. As always, comments and questions are welcome.

EFSF- Debt Holders Give Vote of Confidence

Those of you who read my review of EFSF’s last quarterly earnings release know I expressed some concern about the company’s balance sheet. In essence, their debt was about equal to the cash they had available for operations, and hence it appeared, at least on the surface, the company would suffer some cash constraints.

This morning EFSF put out a press release which alters the balance sheet landscape completely, and puts the company back on firm financial footing- they are perfectly positioned from a cash point of view to execute the Cinnergen roll out and move onto the other products they have in the pipeline.

The real eye opener here is the way they got rid of their debt. EFSF announced the debt holders converted their $1.5 million in both long and short term debt into restricted shares at $.55: WOW!!!!!!!!! – anotherwords- the debt holders just bought $1.5 million worth of stock for $.55.

With EFSF currently trading at about the $.40 threshold, this move represents a tremendous vote of confidence in the future of both the company and the stock price.

Here’s the chart in the early going:

efsf11.gif

The stock, which came down after last week’s surge above $.42 on the Cinnergen news, is surging again today on this news.

I would love to see it eclipse last week’s high, and set up a series of higher lows and higher highs. Whether it can or not, these kinds of high volume days act as a cleansing mechanism to take out the sellers and replace them with long term buyers- thereby setting up the stock for its next big move up.

The next big step would be to break the long term downtrend line. That would be huge.

Whether we make it above last week’s high or not, this thing is setting up for a big move. As I predicted, EFSF is starting to get noisy again, so look for more.

The debt holders just bought 2.7 milllion shares at $.55. How much do you want to own at $.40? What a vote of confidence.

Comments and questions are welcome.

Titan Crashes: What Now?

TTGL has been under a bit of pressure of late. I don’t know why. My suspicions are all related to the lousy financings the company engaged in when it was just getting rolling in the telecom space. Shareholders are still paying the price for the company’s weak capital structure on the financing side, despite having cleaned up about 75% of the problem.

My SSL on this one is $1.04, so it is now crunch time. It is time to decide if you want to hang in there, or take your small loss and/or small gain and move on.

Certainly, from a fundamental point of view, the company is worth considerably more than today’s level. But, that does not put the stock there.

I believe $1.40 is far more problematic than today’s swoon to $1. Why? Because that is the level the stock simply cannot break through despite numerous attempts, and investors are losing patience.

Right now, this is a good company, but a lousy stock. Let’s look at the chart:

ttgl1.gif

This chart goes back to the OTC Journal’s first edition on the company- the stock was about $.80 at the time.

Since that time, the company has done nothing but deliver good news. Increasing revenues, turning profitable, etc. Despite turning profitable and likely delivering about $150 million in revs this year, the stock continues to trade at the anemic market value of about $55 million. Pathetic.

For some reason, we are in a low volume environment for microcaps right now, and the stock could not hold up under the pressure of whoever wanted to get out. Probably one of the two agressive funds who are in this deal. (Specifically Cornell and Laurus).

From here, the stock will probably bounce, and if you want to get out, you can probably do so in the $1.10 to $1.20 range in the next few days.

Today’s red bar on the chart is just plain ugly, and there are a couple of ways to look at it. You could decide the stock is a mess technically, get out, and wait for it to behave better. Or, you could figure the seller is now out of their position and the next time it gets some legs it could break out through that $1.40 level with less resistance.

Longer term- here’s what the company needs to do. Collect this money promised from the excise tax rebates from AT&T, Sprint, and the like. Use the money to buy out the toxic debt, and clean up the capital structure. This stock will then have a shot at getting fully valued. ($4 range)

If you like the idea, the trick will be to buy it on days when it swoons; like today. Sell it or sell part of it when it surges.

I would be more inclined to be a buyer vs a seller today. Today’s action reeks of capitulation. Someone who wanted out is hopefully gone. A bounce is probably in the cards. However, I wouldn’t blame you if you decided this one is not for you.

Planet Stealth Rally?

I almost hate to say it or think it. Why? because visualizing this stock getting healthy is the surest way to sabotage any move.

However, looking at the chart, there does appear to be a “Stealth Rally” going on in CPNE at this time. Long overdue, but nevertheless here.

As shareholders of CPNE, we are all probably better off investing in a company that makes heart monitors- after all, this stock can give you heart attacks. It is about as volatile as any I can remember, and seems to do the opposite of what you expect.

Let’s review- From the January high of $3.40, the stock simply got clobbered when the market learned about the 4.5 million shares fund manager Jeffrey Feinberg bought directly from insiders at $1.90. Those shares are now in registration, and Feinberg couldn’t sell them even if he wanted to.

In its usual fashion, the stock over reacted and sold off to the $1.50 level, before beginning a rebound phase.

cpne1.gif

Here’s a look at the stock since making its 2007 low. The one day surge up to $2.37 happened when the company pre-announced Q1 earnings results. It was short lived.

The stock then fell back below the 61.8% retracement level, but only for a few trading days. It has since entered a bit of a stealth rally, trying to work its way higher by a couple of pennies everyday.

When I think of CPNE, two adjectives come to mind: Sloppy and Crazy. This stock is both. It seems to want to work its way higher right now.

Here’s the psychology of this stock- the drop to $1.50 simply freaked a lot of investors out. When it rebounded, those shareholders gave a collective sigh of relief and dumped the stock after adjusting their pacemakers out of the heart attack zone.

Now, we have come back to a higher low, and there are less sellers.

I believe the stock will continue to “drift up” for the time being until the real 10Q is filed. I still don’t have the EPS number for Q1. If it’s a big surprise to the upside, the stock will probably get clobbered. If it’s a surprise to the downside, it will probably run up. Who knows?

Here’s what I do know- it was last year about this time when CPNE announced its first break even quarter, and the stock was $.20. It’s been a wild ride since then, but all in all a very profitable one for most of us.

If they continue to deliver the numbers, the year ahead could be as good as the year behind. If you filter out all the noise, the movie is pretty good. You certainly can’t fault the CPNE on the performance side.
I believe CPNE is a buy right now.

Comments and questions are welcome.

eFoodSafety- What Now?

I knew EFSF was just ready to break out. The chart was just too perfect for the stock to not have a great day yesterday.

So-what now? What if you didn’t “accumulate” as I suggested back on April 10th and get positioned for yesterday’s big surge? What if you want to buy the stock? How do you do it without chasing the stock and paying too much?

My guess, the stock is now going to enter another series of higher lows and higher highs, which I hope ends up in a very significant long term break out.

Here’s what we do- go back to old reliable- accumulate the stock when it gives back 61.8% of its recent gain. Where is 61.8%? Glad you asked:

Here’s the chart:

efsf1.gif

The 61.8 is circled. It’s just under $.38. Remember- this is a very short term look. Just a matter of a few days. Ideally, you would like to see a 61.8% retracement that holds and extends out for a number of days while the volume dries up. The longer the time frame, the more accurate predictor.

Here’s another guess- I believe we will now embark on a another series of events from EFSF. After being quite noisy, the company was rather quiet for about a month.

This company has a history of making noise in the 4 months I have covered it, and I expect that trend to continue until proven otherwise.

Therefore, $.38 might prove to be the right number, with the next surge taking the stock above yesterday’s high of $.425. When you’re looking this short term, it’s tougher to predict, but the principles still apply.

Here’s what I find amusing- What if a NASDAQ stock had jumped from $35 to $42.50 yesterday- a $7.50 move? It would have been all over CNBC and the Wall Street Journal. Yet, in our little market, it doesn’t get recognition.

Oh well- I’ll take the percentage gain, and look for another.

Comments and questions are welcome.