US Energy: Stick With The Discipline

US Energy made a valiant effort to come up off the canvas last week, but the move was short lived and the stock seems to be slipping back into a coma.

Sometimes the stock market just doesn’t make sense. This is the case with US Energy. One would think the market would be willing to give the company the benefit of the doubt- after all, they have the right product at the right time and the right contracts.

However, it seems investors have a hair trigger for this one, and I don’t quite understand why.

Here’s a very short term look at the stock:


The chart shows last week’s move up from the absurdly oversold level of just over $.10. All the company did was put out a press release reminding investors about their achievements.

As you can see, we had a couple of big days on the volume side, and the stock traded up nicely. As has been the case with this one all along, the move did not hold, and sellers have pushed it back down a bit, albeit on much lighter volume.

Now would be a great time for the company to deliver more substantive news. I’m not sure what could top a $54 million contract over 5 years- perhaps news of the first purchase orders from the contract.

Here’s where we are today- the perfect level to buy this stock based on this very short term look would be $.126.

Therefore, my SSL for the stock is now $.12 if you are a trader. For long term investors- just stay the course- I believe the company will be delivering increasing revenues for at least the next three plus quarters, and the valuation is absurd at these levels relative to what they have announced.

Comments and questions are welcome.

Callisto Pharma Erupts- Anyone Know Why?

KAL erupted up the charts today, and I have no idea why. If you are still holding this stock after the long, hot, declining summer, this is one that has never recovered. My stop loss for traders was $1.20. Therefore, if you held it down below that level, you are defined as a long term investor.

As a long term investor you have to be pretty excited today. This is one of the exciting things about biotech- you never know when you will have an explosion for whatever reason. It is highly unpredictable.

Here’s the chart from about 1/3 of the way through the trading day:

As you can see, the stock was hovering around $.75 two trading days ago. Today, it simply blew up the charts on the highest volume in many months- it has already traded 1/2 million shares at 9 AM Pacific.

I have no idea why- there is no news from the company, and no SEC filings in the EDGAR system to explain the move. Perhaps a peer review in a scientific journal.
In a case like this, there are a number of possibilities- perhaps rumors of a potential buyout. A pending regulatory event- good clinical results to be released.

Or, sometimes in a case like this it is technical. Some hedge fund could be short the stock, and is being bought in against their will due to some failure on the funds’ part.

The company could put out news, or it might not. We might never know. However, I will take it. Gladly.

Comments and questions are welcome. If anyone knows what is going on here, I’d sure appreciate some 411.

How Do You Spell “Capitulation”? USEI

Investing in microcap companies can be very frustrating. For me, the worst form of frustration comes when companies deliver great fundamental developments, but the stocks trade poorly. I can put up with companies that fail- that’s part of the landscape. Occassionally, you will get lucky and a stock will do very well even when the company doesn’t do well- you can make money sometimes just by being in the right group.

US Energy is about as bad as it gets. All the company has done since covering them is deliver multilple smallish contracts, a $54 million deal to convert 10,000 buses in Thailand over the next five years, and a deal with GM to include their technology in pick up trucks manufactured in the Far East.

Despite what one could only view as extraordinary achievements for a microcap company, the stock is grinding towards a new all time low, much to my amazement.

I believe we have arrived at what I like to call the “Capitulation” stage. This is the point at which everyone who wants to sell either has or is going to. It’s absurd at this price, but it’s reality.

Here’s a quote from my last BLOG entry on the stock (9/13):

“Here’s what I can tell you with certainty. This stock will begin to trade well when you least expect it. When the frustration reaches maximum threshold- when you don’t believe the stock can ever go up- when you see several other stocks trading much better and wishing you had your capital elsewhere- you will sell out of frustration, and it will be much higher one week later.

You see this time and time again in the microcap sector. Investors who have been disappointed in a situation over time sell their shares the moment they see daylight. The stock is providing them and exit strategy because the company is finally performing. They sell, and before they know it, the stock turns around and rockets to much higher levels.”

Admittedly, I didn’t forsee the stock trading as badly as it has. There must be a multitude of old investors who just can’t wait to pull the trigger and sell at the bottom. Also, I’m sure a number of new investors who bought on the $54 million contract announcement are throwing in the towel as well.

Here’s the current chart:

As you can see, this stock is trading at a multimonth low. This is painful if you own it, and especially painful if you are watching other stocks trade well while this one just continues dropping.

Another issue probably exacerbating the situation- the company just filed a statement with the SEC stating they intend to seek shareholder approval to affect a reverse split- they included several possibilities in the filing; 2 fo 1, 10 for 1, etc.

The approval will be granted as three individuals control more than 50% of the stock. In my view, the negatives associated with a potential reverse split are already factored into the price of this stock.

I’m planning on publishing a mid week update on this company. Should have some more info on the outlook for Q4 etc by then.

Sometime in the future this company will be able to announce purchase orders and much larger trailing revenues. At that point in time, the stock will be behaving much better.

If you assume there are 150 million shares I&O, at $.12 the market is saying the company is only worth $18 million. With $54 million off of one contract alone in the coming years, this has got to be one hell of an opportunity somewhere down here. Long term investors only- I have no idea when this thing will turn, or how low it could go. My instincts tell me we are near or at the bottom.

Comments and questions are welcome.

PhotoChannel: Hits Perfect 61.8% Retracement

For those of you who like PHCHF, it’s deja vu all over again from the sell off in CPNE two days ago.

Some of the stocks that have been trading very well of late are finally providing low risk entry levels thanks to corrections in an ongoing uptrend. Two great OTC Journal examples: CPNE and PHCHF.

Both have been rocketing up the charts in recent weeks without taking a breather. CPNE finally corrected two days ago. In the BLOG I called a perfect 61.8% retracement on Tuesday at $1.40- sure enough the stock is $1.65 as I write this BLOG.

Today, PHCHF finally succumbed to some selling pressure. It has simply traded too well of late, and was overdue for some profit taking. It has arrived at a perfect 61.8% retracement level.

Here’s the chart:

There are two elements worth pointing out on this chart. 1- the stock has pulled back to a near perfect 61.8% retracement of the September move. 2. It pulled back on very low volume.

These are two elements which suggest it is currently at the perfect purchase level: as you can see from the chart is it $.1996, or right around $.20.

If you like this one, and either want to establish a position or add to an existing position, technically now is the time.

Comments and questions are welcome.

CPNE- If You’ve Been Waiting, Act Now

CPNE collapsed today for no apparent reason. At first I thought it might be related to today’s annual shareholder meeting, but then I heard it was simply an election of board members and there were no attendees.

I know there were rumors floating around that the company was going to announce some preliminary Q3 numbers- that didn’t happen at the AGM.

My suspicions are someone was either hoping some preliminary numbers would get the stock charging up, or someone just decided to sell a bunch on a low volume day. It never ceases to amaze me how short sighted some people can be.

At any rate, today the stock traded back to a perfect 61.8% retracement of the most recent big move. If you have been looking for a favorable entry point, I suggest you pounce right now. Here’s the chart:

The stock ran from $1.05 pretty much straight to $1.80 starting in early September. This is the first significant correction since my last BLOG posted entry level of $1.20.

As you can see from the chart, the $1.344 level is a perfect 61.8% retracement, and the level you should pounce on the stock.

The volume today is moderate, which leads me to believe this is not a direction change, just a pullback on a light volume day. It was only 100,000 shares in about a 15 minute period that caused the stock to swoon. Since then, the volume has picked up considerably as other bargain hunters are jumping in.

If you have been looking to establish a position or add to one, now is the time to do so. Make $1.20 your SSL.

Comments and questions are welcome.

PhotoChannel Rocking; Caution Warranted

PhotoChannel Networks has been climbing the charts nicely since I published on the stock at the $.19 level on September 23rd. Today, the stock made an intraday high of nearly $.26, and finally cooled to close at $.23. If you bought it on that first Monday, just one week ago, and sold it today north of $.25- net return 36%. Not bad for the first week.

However, I didn’t start covering this company for a move to only $.25. I am looking for $.40 to $.60 by year’s end. The stock is trading very well because there is a lot of anticipation about this company’s potential for growth. With the interest in this stock, I would assume a major news event yield a big, spiky run. Those who really pay attention to my writings know I consider big spiky surges to be good selling opportunities.

In fact Shutterfly, which I suggested could be a hot IPO and a catalyst to put a bid into PHCHF, is now trading at a discount to the IPO price. However, it doesn’t seem to have had a negative effect on PHCHF.

The stock made a nice surge today, and finally gave a little ground. It’s normal, and the stock was overdue for a pause.

If you haven’t participated in this idea, and still want to, I believe a little caution is warranted at this time. The stock has been on a tear of late, and stocks don’t straight go up without little retracements along the way.

I believe the company will reverse split the stock. Probably 10 for 1. They have shareholder approval to do so, and recently gave a number of institutional presentations. Most institutions simply can’t buy $.25 stocks, but many can buy $2.50 stocks.

I believe a reverse split would be healthy in this case, but most penny stock investors view reverse splits as negative. Therefore, in the event a reverse is announced, the stock could sell off a bit, and that would represent your opportunity to accumulate at a reasonable level.

Here’s the chart with a 61.8% retracement level which has proven such a good level to accumulate in the past:

Right now, the 61.8% retracement level off the recent surge is $.1982, or $.20 just to round it off.

In the event of a pullback in the stock, the $.20 level would represent a great entry level. SSL on this one is $.18. Don’t forget- it’s PHCHF on the OTC BB south of the Canadian Border, but for our friends to the North, it is PNI on the TSX.
Comments and questions are welcome.

CPNE Breaks Out on Inevitable March to $2

Commerce Planet continued its inevitable march to $2 this AM with a nice break out on news of one of the company’s division’s accelerating growth.

The stock is becoming fairly predictable- surge up, a little pullback, a “cup” formation, and another breakout.

If you are still looking to accumulate this stock, I would not do so today. I would wait for a pullback and a little quiet trading.

Here’s the chart from the last BLOG I published on this company:

This BLOG was published on September 25th. Notice I pointed out the 61.8% retracement at $1.20 as the ideal point to buy the stock if you wanted to continue to accumulate. You have to give me a little credit for calling the ideal entry level in the past few weeks.
Fast forward a couple of weeks: Here’s today’s chart

Here’s what I want you to see in this chart. The horizontal blue line I drew in the chart is the same one I drew in a previous chart. I stated once the stock had broken above the level it had cascaded down to in July of ’05, it was pretty much inevitable it would head back to the top of the beginning of the drop.

It is headed there now. Today, the company announced their Legacy Media division was growing more rapidly than anticipated. The market responded with 620,000 shares of volume in the first 2 1/2 hours of trading, and a another new multi month high.

Today’s market reaction tells me the following- the market is keyed in on numbers for this company- any hint of improving numbers brings out buyers.

I believe October will be the last chance to accumulate this stock under $2- I believe it you want to own it for that move, you need to own it before Q3 numbers come out.

However, I wouldn’t accumulate now- wait for a pullback. I can’t wait to see this stock print at a new all time high.

Comments and questions are welcome.