Upside Down on QID- Where to From Here?

Last week I was looking pretty smart as the market gave quite a bit of ground after two months of unabated appreciation.

This is a different week, and the market has resumed its climb, which so far is ok with me.

I one point I was up nicely on my 2,000 shares of QID- nearly $4k- now, with the market charging back up and on to higher levels, I am currently in a loss position of around $2800- however, as the market moves up, I’m making it back with PNWIF and CREE behaving a bit better.

So, since I chose not to take the profit when the opportunity was offered, where to from here? I was considering going in a bit heavier, but have held off for the time being. I’ve had another look at the charts, and believe there is an interesting dynamic going on that suggests there could be a little more upside in the NASDAQ COMP, which is what I’m betting on.

I’m still sold on the idea there is going to be one more big whoosh to the downside in the markets before we can really get healthy. My entry point on this last trade was good for a few days, but there is an interesting dynamic going on that might drive the market a bit higher in the short term. Take a look at this chart:

This chart is an overlay of the NASDAQ COMP vs the QQQQ- which represents the NASDAQ 100. As you can see, the QQQQs completed a 61.8% retracement of the 1st quarter carnage, but the NASDAQ COMP never really got there.

I believe there is a possibility the NASDAQ COMP might still be gunning for that 2600 level, which would complete the 61.8% retracement of the sell off there as well.

The S&P 500 looks almost identical.
If the NASDAQ COMP does trade up to 2,600, that is when I will get really aggressive on QID, which might include adding to my position in the stock, and/or jumping into some more aggressive call options.

For the time being, I am just standing pat and waiting with the position still open. I should have sold when I was up, but you can’t call them perfectly all the time.

With the headwinds of higher oil and interest rates, I just don’t think the market is quite ready to get super healthy. The pros are probably painting the tape at month’s end to make the picture look at bit rosier than it deserves to be and blow out all the shorts.

Comments and questions are welcome.

PhotoChannel- Gapless Open Equals Opportunity

PNWIF opened today pretty much on yesterday’s close. Just as I suggested in today’s edition, I jumped in for 5,000 shares at $3.75- I believe it was the first trade of the day.

The stock did not gap open, which I believe is the ideal scenario for investors looking to participate.

Here’s a quick chart:

I would be a buyer anywhere under $4. If this news gets the recognition it deserves, a NASDAQ listing should be forthcoming with a reasonable amount of time above the $4 threshold, then higher levels beyond $4 with Costco US, Sams Club US, and China Kodak adding to revenues.

PhotoChannel Trying To Break Out

PNWIF is having a really good day today, and I am keeping my fingers crossed that this little surge is a precursor to the stock trading above $4 and finally obtaining the long awaited NASDAQ SC listing.

Here’s today’s chart, just about one hour before the close:

As you can see, the stock has broken out nicely from the its recent malaise with a nice upside bar. A break above the May high of $3.80 would signal higher levels in the cross hairs in the short term.

In light of recent achievements- launching of the Costco service and Sam’s Club, this stock is certainly entitled to head for higher ground. It’s long overdue.

Comments and questions are welcome.

CREE Getting CREE’md

CREE has fallen below my SSL of $24, so it’s now worth taking a look at and planning a strategy.

Despite having a bleak technical picture right now, I am not going to sell the stock and take my loss quite yet.

This particular stock has a history of being pretty volatile- both to the upside and the downside.

It also tends to make multiple point moves once it gets headed in one direction or another.

The stock headed down in fairly nasty fashion today, but I’ve decided to tough it out.

Here’s why:

The stock is now trading at its lowest level since early January. However, the volume involved in this week’s sell down is far from extraordinary.

The stock’s average daily volume as measured over the last 150 days is about 2 million shares per day. This past week the stock did not trade more than 2 million shares on any one day until today. It was trading more like 1/2 its normal volume, which isn’t much of a sell off as measured by volume.

Today the volume was about 25% above normal. Therefore, this could be the big blow off day of what is really not much of a blow off from a volume perspective.

I am going to wait and keep my fingers crossed for some kind of rebound in the not too distant future.

However, longer term, I am rapidly losing interest in CREE. Last quarter numbers were well below Wall Street expectations, and this stock is simply not participating in the alternative energy movement.

I am a big believer in the future of LED bulbs as a major component in energy saving, but CREE might not be the one. The market certainly is not enamored of this management team.

When some International publicity hits on the future of LED bulbs, this stock will trade back up, and that will be the time to get out.

Until then, I’m going to hang in there.

Comments and questions are welcome.

eFoodSafety: Some Thoughts As We Move Through The Year

The disappointment and debate continues to rage about eFoodSafety. I get more commentary and comments about this company than any other that I cover.

I hadn’t had an opportunity to comment on this week’s news concerning the PurEffect product launch by CK41.

In case you need a refresher, here’s the story. Over a year ago, EFSF entered into a licensing arrangement with new kid on the block CK41. CK41 is newly formed company in the business of marketing products through infomercials. The company is run by a bunch of ex-Gunthy Renker folks, so they are battle tested and proven.

PurEffect is EFSF’s answer to Proactive- the product sold by informercial with celebrity endorsements used to treat acne. Their #1 spokesperson is Jessica Simpson. They have no real competition in this field.

EFSF has entered into an arrangement with CK41 wherein they provide the product, CK41 provides the whole marketing campaign, and profits are split.

Both EFSF and its shareholders expected CK41 to commence a marketing campaign a full year ago. It’s launch has been indefinitely delayed, and the delays are finally drawing to a close.

This past Tuesday, EFSF announced CK41 has finally committed to a marketing campaign launch date. According to the press release, marketing will begin in July in the form of “a multi level internet campaign” as Phase I.

Phase II will include 1 and 2 minute commercials, and 30 minute infomercials. The press release does not specify when Phase II will begin other that to state after Phase I.

Investors are pretty much sick to death of waiting for this program to get going, but now at least there is a firm commitment and date to get the whole thing rolling.

I was encouraged that they have finally committed to rolling out the campaign. CK41 has already spent a lot of money on video production including paying a number of celebrity endorsers for their time, and it seems like they really have to go forward sooner or later. However, I was disappointed that they left the timetable for “Phase II” open ended. I suspect they feel it’s not worth buying all that media in the slow summer months, and will really kick it up in September. Let’s hope that’s the plan.

Here’s my big picture view on EFSF. I believe investors have been waiting for EFSF to deliver a blockbuster product that gets a huge retail reception and delivers $100 million in top line revs with big margins.

I would love to see that happen. In my view, the more likely scenario throughout the remainder of this year will be a smaller contribution from a lot of different fronts.

If the current marketing plans yields a few million in sales for Cinnergen and Cinnechol, and PureEffect gets rolling with $3 to $5 million this year, by year’s end you have a company delivering $10 million in annual revs and a reasonable bottom line.

The company’s Q2 will be important in my view. Their fiscal Q2 is August, Sept, and October.

I believe the company needs to generate $2 to $2.5 million in that time frame. If they can’t achieve these kinds of numbers it will be time to consider moving on and abandoning the idea. However, between all the products in various phases of commercial release, this sales level should be achievable.

If it is achieved, the stock is probably a double from current levels with additional potential out in front.

I could show you the chart, but it’s pretty much the same look for sometime now. It trades between $.15 and $.20, and holds within that range.

If it trades much below $.15 to $.155, it might be time to look at capital preservation and get out. This train is not high speed yet, but appears to be slowly gathering momentum. I just hope the stock can follow suit and some point in the near future.

Comments and questions are welcome.

QID Update: My Game Plan To Get Shorter

The market is enjoying a nice little bounce today after a couple days of getting roughed up.

I believe this corrective phase is just getting started, and the market is entitled to a much more severe pullback. I have a lot of conviction for this idea, so I’m prepared to commit a lot more capital if things go my way.

If the market had continued simply free falling, I would have just waited for QID to go up a couple more points, taken my profits, and moved on.

However, the market is cooperating today by giving me a chance to add to the position. Here is my strategy.

I’m going to treat QID like any other stock, and accumulate on the Fibonacci Retracements.

Here’s a very short term chart of this week’s action in QID:

As you can see, QID made a nice move from $36.78 to $40.68 over the course of this week.

Today, QID is coming back down a bit.

If QID finds its way down to the 38.2% retracement at $39.20, I will add to the position. If QID finds it way down to a full 61.8% retracement at $38.25, I will add a lot more, and perhaps even jump into some of the call options I suggested earlier in the week. I would probably go out to July if I invest some of the call options.

As long as QID remains above $39.20, I will simply hold my position unless it runs up into the $44 to $45 range, and which point it will be time to take profits.

I believe the long overdue correction has just begun. If it comes the way I see it, it will set the markets up for a very strong post summer rally.

Comments and Questions are welcome.

Larry’s Look at Today’s Market: 5/21- 3:11 Pacific

I’m giving myself a little pat on the back today, and I hope you are profiting from my last two editions and last week’s BLOG.

As predicted, the market is coming a bit unglued after a two month, pretty much unabated run up.

The CNBC contrarian indicator worked perfectly. On Monday, the network trotted out the usual cast of characters, all forecasting the “all clear” sign for the markets on the horizon.

All clear- hardly. Today, they had a few comments with a slightly more negative tone, and once we’re done another 100 points on the NASDAQ COMP they will have nothing but gloom and doom forecasters lined up to predict the demise of the American economy and civilization as we know it.

That will be the time to take another look at the long side for some of the recent high flyers that have entered corrective phases- Apple Computer (NASDAQ: AAPL) and Research in Motion (NASDAQ: RIMM) are two that come to mind.

In the meantime, my 2,000 shares of QID at $38.67 are now up a cool $3k at $40.20. The options I suggest- the June 38s at $2.50 (QID.FL) closed at $3.00, and the July 38s at $3 (QID.GL) closed at $3.90. Those are nice gains for 1 1/2 trading days.

If the market bounces back and tries to recover a bit, I am going to add to my position by picking up some of the calls or simply adding to QID. I believe there is a ways further to go in this correction, and my target for QID remains in the $44 to $45 range over the next couple of weeks.

The headlines would have you believe that the market’s sell off was all about oil today, but it wasn’t. However, oil is spiking to $134 in after hours trading. That’s not going to help.

The market’s real concern was all about the minutes of the last FOMC meeting, which were released late in the day. Within the minutes it was found the FED had downgraded its economic forecast for growth, pretty much committed to stop lowering interest rates, and raised inflation fears. All in all, not good for stocks.

On the microcap front- pretty much unchanged. SPKL cannot seem to break through $.90- EFSF disclosed CK41′s game plan for PurEffect yesterday, and it was received moderately well, and all the others remained quiet with very little price movement.

Tomorrow’s another day, and I’m hoping for a little relief rally so I can commit more capital to betting on a correction. If it keeps selling off, I will simply have to be happy with what I’ve got. This correction is going to be the pause that refreshes, and could set us up for an unusual summer rally.
Comments and Questions are welcome.

Nighthawk Q1 Numbers- Growth As Promised

Let’s start with the really good news. Some might think the really good news relates to top line growth- after all, NIHK delivered the best top line 1st quarter I have ever seen in about 2 1/2 years of covering this company. They delivered $826k- up from $212k the same quarter last year. That’s a growth rate of nearly 300%. However, I don’t see that as the best news.

Here’s the best news- it appears the dilution which has been killing the stock price when there’s volume could be winding down. At the end of 2007, there were 134.4 million I&O. At the end of Q1, there were 135.9. I’ve witnessed quarters where the number went up by 10 or 20 million- If and when real volume comes back to this stock, this bodes well for stock price movement.

2200 of the hi def set top boxes were shipped in Q1, but there are currently 3300 on back order. This suggests Q2 could be another great quarter with more significant growth.

I can’t help but remark- in the last month I have spent about 12 nights in 4 different hotels. One was one of the fanciest names in Manhattan- another a $100 per night Marriot on the outskirts of Sacramento.

Of the rooms I have stayed in, 3 out of 4 had very nice, hi def, flat screen TVs. None had a hi def picture available. From a common sense point of view, this suggests there are many thousands of hotel rooms that need a hi def broadcast and interactive features with the internet and the content the individual hotel wants to provide. The market they are going after is absolutely huge.

After digging through the cash flow numbers, it appears NIHK is currently burning through about $100k per month in cash.

With cash, receivables, and inventory matching about just about even with payables, a cash short fall could become problematic. This would require another round of financing, and more dilution. However, if sales and margins could go up about 10% to 20%, the company might finally achieve a cash flow break even, which would halt the dilution and give the stock a real chance to perform. It looks to me like it’s going to be close.
I’m not even going to bother putting up a chart. It’s simple- the stock wants to trade between $.045 and $.055 right now. We need more volume, and renewed enthusiasm for microcaps, and more corporate progress to see NIHK make another one of its big runs.

In the meantime, as I have been saying all along, owning NIHK is like owning an option that doesn’t expire- there is risk, but the company just keeps getting better and better.

Another top line bump is what the doctor is ordering for NIHK, and with back orders of 3300 set top boxes, the odds seem likely.

Comments and questions are welcome.

Nighthawk Q1 Numbers Impressive

I’m travelling today and already late for my first meeting, so I can’t give you any real feedback on the NIHK quarterly report.

However, it shouldn’t be that complicated. Revenues are way up, and losses are down. One of the biggest expenses now is dividends on preferred- which is being paid in shares- this could represent more supply for the market to wrestle with, but that’s the price of poker.

I’ll craft more thoughts when I have some time to look at this one. For the time being, I still believe owning this stock is like owning an option that doesn’t expire.

Submit and comments or questions, and I’ll get on it next week.

Heavy Market- Going Short

Here’s my short term trading idea- time to go short.

The larger market has been chugging up the charts relentlessly, all fear virtually gone. This is not an environment that lends itself to no risk in the market.

The VIX - the measure of levels of fear in the markets, has all but disappeared. Remember, I wrote a BLOG on using the VIX as a counter intuitive tool to clue us into making trades on the over market.- VIX at or below 20- too much complacency- sell.
VIX at or above 30- too much fear- buy the market. Here’s a chart of the VIX:

As you can see, the last time the VIX was this low was back in October 9th. Sorry you can’t see the timeline, but trust me, that was the time frame.

By November, we started into one of the ugliest four months I can recall in the stock market’s history.

We’re not going into another period like that as a lot of the damage has already been priced into the market. However, I do feel we are overdue for a multi week correction.

Here’s a look at the QID- the ETF I have chosen for my own account to get into a short position:

This is the security I have chosen to take a short bet on the overall market for my own money. This is the QID- an ETF that trades inversely to the QQQQs on a 2 for 1 basis. Anotherwords, if the QQQQs go up 1%, QID will go down 2%, and vice versa.

Today, as a starting position, I picked up 2,000 shares of QID at an average cost of $38.67. I am prepared to go a little deeper, or perhaps even own some puts if we go much higher.

The only wild card- options expiration tomorrow, where things can be a little wacky. I could be prepared to go even deeper next week if the market hasn’t started a corrective phase.

Comments and questions are welcome.

Pickle Quarterly Numbers Reviewed: As Expected

SPKL filed its Q1 10Q yesterday afternoon, and the filing really contained no surprises. The market is responding in kind my delivering another quiet day of trading with the stock still trying to get through the $.90 and stick higher than that level.
The top line number was $625k in revs- up from $221k in the same quarter in 2007. That nearly a triple in top line performance- 182% revenue growth to be exact.

The quarter was reflective of exactly what the company has been saying it was doing- investing the $6 million raised at $.85 per share last December into expanding it’s company owned store portfolio.

If you are wondering about the current state of restaurant openings and future openings, here’s a quote directly out of the 10Q:

As of May 3, 2008, we have sold 127 franchises. Of the franchises sold, 31 franchise restaurants are opened and operating, 1 company-built and owned restaurant is open, 5 franchise restaurants have been repurchased by the Company, 6 franchise restaurants are under construction, 2 company restaurants are under construction, 6 franchise sites are under lease negotiation (we have either received an actual lease that is being reviewed or a letter of intent), 1 franchise restaurant closed and 75 franchise sites are subject to area development agreements. An area development agreement is entered into when a franchisee has purchased the rights to a geographic area with a set number of restaurants in that area.

As you can see from this statement, it is very reasonable to expect continued growth from SPKL long out into the future.

At the end of the quarter, SPKL still had about $3.6 million and cash, and no long term debt.

The only real liability on the balance sheet is about $1 million in deferred franchise fees. This debt is really the fuel for growth. This liability is, in fact, the franchisee fess already paid into the company for expansion. It is shown as a liability on the balance sheet until the restaurants represented by the franchisee fees open for business. Then, the liability is converted to revenues as SPKL has fulfilled its obligation to get the store open. As that number goes down, the number of stores goes up. I would like to see the number go up, as that means more franchises have been sold.

As far as losses go, the company lost about $1.5 million, or $.03 per share. I would expect the losses to continue throughout 2008, and improve to a profit or at least cash flow positive in 2009.

New store openings are now picking up, with several on the horizon.

Here’s the current chart:

This is a slightly ascending wedge. The market is just grinding away at that $.90 resistance point. Sooner or later, it is going to break out, and bust north. When it does, it needs to work its way higher than $1, to set up a pattern of higher lows and higher highs.

It’s tough to say where this stock might be in the next two weeks, but the company is proving its worth everyday with new franchise sales and new store openings. If you can see out a year or two, this company should be far more valuable than the current $42 million market value it commands.

There aren’t many fast casual chains growing at this clip. If you’re not a believer yet, go try the food.

Musings Of Larry Isen On Today’s Action: 5/12, 1:15 Pacific

Another snore fest in micros today, but a little excitement in the larger cap arena.

The excitement comes from RIMM, and now I have some losses to make up. This morning, RIMM announced the next generation of Blackberry- complete will all kinds of media rich and hi def stuff on the screen along with the new and more robust 3G technology.

I’m down about $13k on my puts, and I don’t think they are going to be worth anything with the stock closing today at $141.50. Over and done with. Ouch.

In light of crude now trading in the $125 range, I believe the market is defying gravity in the short term.

Earnings estimates for the S&P 500 have been headed lower except in the energy compound, and these high energy and food costs have got to act as a dampener for economic growth.

In the large cap world, we have enjoyed a nice rebound in April and May, and I believe a correction is in the works.

Here’s a look at the NASDAQ COMP with a Fibonacci retracement. This a reverse retracement look. The NASDAQ COMP cratered from 2730 down to 2156- December to March.

It has since rebounded to almost 2500. At 2511, it’s a nearly perfect 61.8% rebound of the whole move down.

The chart suggests to me we are nearing the point of upside exhaustion.

Before long, I am going to be suggesting shorting one or two of the indexes, or buying puts if you prefer.

I believe we are overdue for a little correction. When, and if it comes, I would use the opportunity to move into a couple of big cap names that have rebounded dramatically- AAPL for one, which I believe is going to $250, and RIMM for another, which I believe is going to $200.

Lots to cover this week. I expect some sort of update from EFSF. SPKL will have Q1 numbers out, as will NIHK. Look for BLOGS on both those events.

Musings Of Larry Isen On Today’s Action: 5/5, 3:50 Pacific

Interesting day. The Cisco earnings buoyed the market early, but it couldn’t hold. New all time high oil prices at $122, combined with other rising commodity prices could not keep the market moving north.

The DOW closed down 200, and NASDAQ gave back just under $50. RIMM, a stock I want to see go down, finally pulled back under $130- so I’m starting to gain back some ground on my put options. I need the stock to drop about another 3 points to make some money- with a little luck, that could happen tomorrow.

Despite being a tough day for larger caps, we finally saw a little action in a couple of our micros today.

PhotoChannel (OTC BB: PNWIF) gets honorable mention for perking up nicely. The stock closed at the $3.78 level, up about 4% on the day. The stock also traded just north of 1/4 million shares, which is a nice volume surge for this issue. I’m looking for $4 so this darn thing can hopefully get the long hoped for and wished for NASDAQ SC listing and start getting more institutional sponsorship.

Spicy Pickle (OTC BB: SPKL) keeps trying to break through that $.90 level. Another 100k day- there have been a pretty consistent stream of those days. Persistence will break down resistance on the issue sooner or later.

Despite all the negative stuff going on in the overall economy, the dollar was up more than half a percent again- I believe money is starting to rotate into the oversold dollar, which may help mitigate the insane oil prices.

I think we’re going to get an update in pretty short order on where we are with eFoodSafety and its product line for those who have been waiting.

Tomorrow’s posting will be late as this one has been. Better late than never.

Comments and questions are welcome.

Musings Of Larry Isen On Today’s Action: 5/5, 1:30 Pacific

Another day, another yawn. Sorry about last week. If you were looking for some daily commentary, I was otherwise occupied running around NYC for the week, and it makes it tough to get the content side in. The excitement of the FED meeting was the big story for the week, but I covered that in a Thursday/Friday edition.

I was in NY working on two new ideas I will be delivering before the end of the year. I’m going with less ideas, but bigger and better ones.

My observation today is one of frustration. I’m frustrated because there’s an evident change in the character of large caps, but no change at the small and micro cap level- yet.

For the first quarter of 2008, it was “Sell the Rips, Buy the Dips”. My single best trade of 2008 was the Monday morning after the Bear Stearns debacle was announced. Goldman Sachs (NYSE: GS) was simply beaten the morning, and I made $21k in two days by having the courage to buy.

In fact, I looked at a chart of AAA mortgage portfolio values today, and it is moving to the upside for the first time in a long time. The porfolios have appreciated from a low of $51 on a $100 par value to about $58- the chart has not broken the downtrend line, but it’s coming close. I’ll show the chart in a future edition- this is a very positive sign for the beginning of the end of the turmoil in the mortgage markets.

However, along with the micros going nowhere, I have been frustrated on the short side of the rips for the last month. Two of the four horseman of the last bull market- AAPL and RIMM just keep going up with no major correction in sight. I caught AAPL the first time, but now I holding nothing as it rockets. I am long a few put options in RIMM right now, and the stock keeps cranking higher.

On the micro front, the stocks I am covering are a snore fest at the present time. SPKL can’t seem to get through $.90- PNWIF gets Costco going, announces Australia, and can’t find any volume. EFSF has been silent on the DRTV campaign, so I guess investors are assuming it’s not working because the stock is very quiet. TCGD and NIHK are in comas. All in all, a very boring period in time.

On the plus side, I guess we needed a period of time where these stocks stopped going down, and simply traded sideways on low volume. We are right in the heart of that period, and I can’t wait for it to resolve to the upside.

On another note- I don’t believe the usual “Go away in May” strategy will work this year. The annual correction has already been priced into these issues, and the only question in my mind is whether we will have a decent rebound before the summer, or if we will have to wait until the Fall.