US Energy Is A Must In Today’s Environment (HYFS)

US Energy (OTC BB: HYFS) is a must own for your microcap portfolio in today’s environment.

I was sitting in a hotel in NYC last night watching CNBC and the evening news on all the major networks. Within 90 minutes I counted 7 reports on the high price of fuel.

With $3 gas here to stay, the price at the pump, and of course the price oil, have become fodder for the media. Expect a lot more of it as oil marches north to the inevitable technical price of $82 per barrel (that’s the subject of another edition).

I found President Bush’s remarks about supply/demand imbalances interesting. Want to knock $20 off the price of oil? - unwind the failing war in Iraq, or achieve the objective. Want to knock at least $.25 per gallon off the price?- get rid of this insane ethanol additive that no one is prepared handle at the refinery level.

HYFS has developed a retrofit system that converts diesel engines to a hybrid that burns diesel/natural gas. Cost savings are dramatic and there is no sacrifice of power.

In the Far East diesel fuels sells for upwards of 7 times what it does in N America- and they are working overtime to build using very heavy equipment.

If this company starts landing high profile contracts, in this environment the stock will simply go nuts- plain and simple. Remember what dot-com stocks did in the internet boom? how about oil stocks last year? The bubble is inflating again.

When I published last week’s initial presentation on the stock it was trading at $.28- since then it has seen a high of $.34- another perfect 61.8% retracement entry level. Here’s the chart:

Once again, the 61.8% retracement served as a nearly perfect entry level. I never ceases to amaze me how well this works. You almost always get a bounce off the 61.8- thank you Mr. Fibonacci. It works in the short term- longer term it’s all about corporate performance and being in the right industry group at the right time.

There is money to be made in alternative energy and fuel savings coming for some time to come. This is my first idea in this arena, and I expect it to be a huge win.

HYFS: This one is definately the right idea at the right time. 

Comments and questions are welcome.

HDY- News Not Moving Stock

I’ve been asked to comment on the recent news and subsequent price movement of HDY. Those following the story know the company was out yesterday with a news release promising “Expansive Exploration”.

In times past, one would have expected this news to move the stock in a favorable direction for those who are long. The stock blipped up briefly on fairly anemic volume, and then continued drifting down slightly.

The action in the stock was quite telling.  Here’s what I believe the market is saying: Get the drilling permits if you want us to buy the stock.

I believe CEO Watts has now made two or three trips to Africa and still does not have the new agreement or the drilling permits in hand. Based on the way the stock is trading, my guess is the market will continue to view any news as lackluster until the deals are signed.

So- we’re back to a guessing game. I believe they will eventually get the permits, and the stock will respond in kind.

I believe the stock will continue to drift down in listless trading until they get the permits, then it will be game on again.

Here’s a current chart:

Here’s a couple of observations about the current chart.

1. As circled in green on the bottom, the volume is drying up considerably- this makes for a positive accumulation point.

2. There was a big gap on the chart when the company announced the CEO was in Guinea. If the company does not deliver the drilling permits in the reasonably near future, I believe the stock will want to come back and fill that gap.

3. The Fib retracements show high probability entry points at $2.94, and then $2.55.  If we saw $2.55 again in this stock, it would be heaven sent.

HDY has a habit of confounding the charts. The stock tends to react more to news, and less to technicals. This week’s anemic reaction to the news tells me the market wants to see the drilling permits.

I have begun accumulating again. I now own 5,000 at $3.215. I will probably pick up another 5k in here somewhere, and keep my powder dry for a deeper drop if I’m lucky enough for it to come.

If you’re not a trader like me on this one, just buy it, hold it, and pray.

Comments and questions are welcome.

Genta Closed Out

FYI: I sold my position in GNTA this morning for a $1500 profit after holding it for about a week. Today’s oil prices have me concerned about the short term future of the market, and I will be travelling next week and not able to watch the stock all day.

Therefore, I decided to err to the side of caution and take my profits. However, if the market holds up, any hint of good news on this stock could send it charging north of $2. Now that I have sold, that is the  most likely scenario. It’s an unwritten rule in the markets.

On the plus side, another 61.8% retracement that yielded a nice profit.


HESG Serves Up Abominable Year End

HESG- What a pathetic mess. As I forecast in the last BLOG- year end numbers were atrocious. Bottom line- the company spent $7.5 million in ’05 (not all cash) to generate $60,000 in revenues. Any way you skin the cat, it’s dead under current management.

So, what to do from here. I have been alluding to a major transformation in the company. They are working on it. Without it you are looking at bankruptcy. Complete failure.

The stock will probably trade to its lowest level in the next day or two.  Here’s the chart:

As you can see, the chart is following corporate performance.

Now would be a good time to mentally review their products. SHUGR and Sequestrol are out there. They have $1 million in sales guaranteed on SHUGR this year from DNP, and more in years to come.

We have reached the point of maximum pessimism. If you have a total gambler’s mentality, now would be the time to look at buying for a dead cat bounce. You will have to assume you could lose 100% of this money, but that’s the way it’s been with this stock for some time.

Comments and questions are welcome.


Trading Alert on GNTA

The BTK- the biotech index, has been under some long overdue pressure of late. This is a simple correction in an ongoing bull market for biotech. Since the end of March, the BTK has fallen from 740 to 676, up from a low of 303 in 2002.

This pullback is offering some trading opportunities in stocks falling back to perfect 61.8% retracement levels, and I am looking for same.

GNTA is a perfect candidate for a rebound. A quick look at the chart yesterday brought opportunity into the crosshairs. I took a very brief fundamental look at the company. They are in the cancer therapy business.

I noted that the company had completed a $41 million financing in March at $2.15 per share. Since then, there have been no major events either positive of negative. I figure if $40 million likes it at $2.15, I should love it at $1.75

Here’s the chart:

Note that the stock charged up to $3.50 in December. The stock has now completed a perfect 61.8% retracement of it’s big move from last June through December.

Here’s what’s great about 618′s- if the stock trades much below, you know it’s time to sell technically. Therefore, you can keep a tight stop. Odds are you are more likely to get a bounce.

I was in yesterday for 10,000 shares at $1.72. I’ll probably sell on a bounce back above $2. I’m in this just for a trade. Since this is a weekly chart, I’m hoping the trade works out within two weeks.

If you are looking for a trade in an oversold stock- here’s an idea. Comments and questions are welcome. 

Callisto Shareholder Letter Sums It Up Perfectly

If you have an interest in Callisto Pharmacueticals, you need to take the time to read yesterday’s letter to shareholders from CEO Gary Jacobs. It sums up the state of the company and its pending therapies perfectly- far better than I could do it myself.

The short term gyrations of the market aside, I believe everyone with a long term perspective would agree the company, over time, has considerable upside potential from current levels.

Biotech stocks like KAL tend to trade up and down based on two major elements: 1. Regulatory and clinical progress, and 2. Wall Street’s appetite for biotech.

If biotech is hot, all ships tend to rise with the tide. The perfect storm is when you have great clinical data, good regulatory progress as it relates to the FDA, and a healthy Wall Street appetite for biotech.

In the case of KAL, it would appear this year will be committed to PhaseI/IIA trials on their two leading drugs. That would suggest market moving events could be clinical data. Down the road, if the data suggests the drugs work, the company could be designing what they call “Pivotal Trials”. This is where the company works directly with the FDA to design a trial in which the drug would get approval if the results were good. That is the kind of regulatory progress that the market can love.

I have had a few questions on their “going concern” note in their audited financials. I am not concerned. They have enough money for the immediate future. The company has demonstrated its ability to raise cash as needed. If they raise too much at their current stage of development, it could be too dilutive to shareholders. Better to raise it in smaller amounts as needed.

Those who follow the OTC Journal know I am a big believer in buying 61.8% retracements. Want to see a perfect one:


Look at the bounce off the $1.30 mark. This is a perfect 61.8% retracement as measured from the November low. To me, this says the stock’s uptrend of the last six months remains intact.

Any further sell of below this level would be a potential sign of a trend reversal. For now, it looks very positive. Biotechs in general have been correcting of late, and you can find a lot of 61.8s in the biotech stocks.

Click Here to read today’s shareholder letter. If you are a shareholder, it provides very precise information of what you own.

Comments and questions are welcome.

NeWave Cranking It Up

Opportunities come in all forms. Beleagured and beaten down victim NeWave is making a corporate performance statement, and the stock is finally responding in kind.

The company is now achieving what I had hoped it would achieve one year ago when I was covering the situation with more regularity. After some expansion missteps in mid 2005 which ended up battering the stock to absurdly oversold levels, the company is now running on 12 out of 8 cylinders, and it is just beginning to be reflected in the stock price.

CEO Mike Hill and his management team are to be congratulated on the awesome job they have done righting the ship. Consider this year’s press releases: 1. January 26: NWWV partners with behemoth Igram Micro to bring 30,000 technology products to members 2. Feb 8: gets 10 million hits in January. 3. February 12- enrollment up 80% from December to January 4. enrolls 4,000 members in 2 months 5. Mar 7- NWAV retires $330k in debt from cash flow.  6. Mar 22: NWWV post record Q4 and full year in ’05. 7. April 4: NWWV retires another $200k in debt from cash flow 8. April 7: Memberships surge another 72% over previous month.

Wow- I’m exhausted. How much better can it get? Can you smell the profits? Q1 numbers should be quite robust. There is no doubt the company has positive cash flow- they paid off $500k in debt in Q1 alone. Could they be announcing their first profitable quarter? We’ll see.

The stock has been in a herky/jerky uptrend since the first of the year. Over $7 million in revs in ’05. Current market cap- $12 million- However, based on early results, I bet they are on a $15 million annual revenue run rate now. The stock is probably trading for less than 1 times sales.

Here’s the chart:

I circled yesterday’s whopping volume surge. It traded 1 million shares, and made a high of $.35 on a big, spikey run. As you know, I am in favor of selling into big, spikey runs.

Looking at the short term retracement opportunities, the stock has already come down to Fibonacci’s .38% to $.2867, and promptly bounced. Therefore, a little pullback to the sub $.30 level would be a great accumulation opportunity.

The absolutely perfect retracement level would be the 61.8 at $.245- however, I don’t see it happening if the corporate momentum continues.

Q1 numbers should be great. My guess- the stock is a double from here this year. Be patient and buy the dips.

Last year’s failed idea can be this year sweetheart. NWWV is sure shaping up that way. Comments and questions are welcome.

Health Sciences Update; Lots of Nothing

I have been promising everyone I would reserve judgement on what to do about severe problem child Health Science Group until the end of March.

The end of March has come, and I am prepared to share some thoughts but no real conclusions. Thought 1- the company’s performance, relative to what was forecast, has been abominable. There are a number of forecasts you can find in SEC filings and press releases. The one that sticks in my mind was annualizing at $10 million by the end of 2005. Not even close- an absolute pipe dream. I don’t know where they got the number, but clearly it had no basis in anything close to reality.

Thought 2- if the current management team remains in place, I would simply sell the stock and get out. Take your loss and move on. Despite having a very exciting product in SHUGR, and now beginning the roll out of Sequestrol (I finally have some to try), the current management team has no credibility in my mind. They have now had over a year to deliver on promised results and little or nothing is happening. Just continued losses and broken promises.

I have a direct relationship with the company. I know they are attempting to put together a major transformation. I don’t have any details so don’t ask.  If they pull it off, it could get the company back on track. If not, lower levels are imminent.

Here’s your chart. The stock is trading in a pattern reflective of corporate performance. I am going to give it a little more time and rate it a hold for now. I definately wouldn’t buy it. You can always sell it later in the year for the tax loss.

I was very excited about the SHUGR product when I first looked at this company. I thought they could sell the daylights out of it. It is by far the best sugar substitute on the market today.

I don’t know whether the problem is product or management, but there is clearly a problem.

On the other side of the coin, Sir John Templeton said he always made the most money  when buying at the point of maximum pessimism. Perhaps this will end up being a buying opportunity. However, a major metamorphosis must take place, and take place soon. The company is now delinquent in filing its year end financial statement. I’m sure it will be horrific when it finally hits.

Sometimes, in the microcap world you are going to have losers. Fortunately, we have the DXCMs, HDYs, and KALs of the world to make up for them.

Final thought- I am suggesting hanging in there a little longer to see if something positive can happen.

Comments and questions are welcome. 

Bad Toys Correction

In Monday’s edition on the Bad Toys year end financial results, there was a mistake which needs to be corrected. When listing the year end financial results, I inadvertently published that the company had $22.8 million in shareholders equity. The number, in fact, is substantially less.

I simply read across to the wrong line in the balance sheet. The shareholders equity, which is determined by subtracting the assets from the liabilities, was actually $7.3 million as of the end of 2005.

In light of the company delivering $44 million in sales and $3.8 million in profits, this number is a little lower than I would like to see in an ideal world, despite doubling from the end of 2004. The company needs to refinance its debt on more favorable terms and improve the shareholders equity. They are working towards that goal, and in light of their profitability it seems highly likely the right funding source could come along.