DIG for DUG

I don't normally do this, but since so many have followed me into DUG, this is a heads-up that I flipped out of DUG today and have reversed long via XLE (or use DIG, the Long Oil equivalent of DUG). I closed out my DUG calls at $7.80, for a 130% gain.

On the DUG chart below, note how the stock has hit the 50 day moving average, which should provide some resistance if not a more substantial reversal:



On the Daily DIG chart below, look at how deply oversold the MACD is, going back an entire year. This is reflected also in the down slope of the price decline, straight down for the past month. Some kind of bounce is overdue. A full fledged reversal to new highs in the XLE has to start with a bounce, so although early based on the technicals, Oil is up $4.00 as of 2:00PM EDT Wednesday, so I am going for the bounce here, at a minimum.

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A pig in a poke

I'm buying SCA in the morning, because it was up 62% on Tuesday, after being down 99% in the past few years and with the hope it will be up 500% or more in the next few months.

But first, what do I mean, "A pig in a poke?"

A pig in a poke

Meaning

An offering or deal that is foolishly accepted without being examined first.

Origin
'Don't buy a pig in a poke' might seem odd and archaic language. It's true that the phrase is very old, but actually it can be taken quite literally and remains good advice.

The advice being given is 'don't buy a pig until you have seen it'. This is enshrined in British commercial law as 'caveat emptor' - Latin for 'let the buyer beware'. This remains the guiding principle of commerce in many countries and, in essence, supports the view that if you buy something you take responsibility to make sure it is what you intended to buy.

A poke is a small sack or bag and is the origin of the word pocket. The word is still in use in several English-speaking countries, notably Scotland and USA. A poke is just the sort of bag that would be useful for carrying a piglet to market.

A pig that's in a poke may turn out to be no pig at all. If a merchant tried to cheat by substituting a lower value animal, the trick could be uncovered by letting the cat out of the bag. The advice has stood the test of time and people have been repeating it for getting on for five hundred years, maybe longer. Fraser's Magazine (1858) reprinted a piece from Richard Hill's (or Hilles') Common-place Book, 1530, which gave this advice to market traders:

"When ye proffer the pigge open the poke."

As for SCA, it is in incredibly complex financial waters, but today it traded over 3.7M shares, average is 700K, and it was up 62%. This flurry of buying came on the heels of an agreement to settle claims against it by Merrill Lynch, pertaining to debt that SCA had insured but now Merrill Lynch was virtually giving away. To go any further into the complex web of financial cross currents and entanglements that SCA is caught up in would be beyond the scope of any semblance of my understanding, so suffice it to say, SCA is a proverbial pig in a poke.

Apart from the stellar performance today, here is some very basic elements of the puzzle:

First, the Market Cap

Next, the Balance Sheet

Our Trusty Technicals

The Trade: SCA is followed by some pretty savvy traders that I know. They are suggesting that as of Tuesday's settlement with Merrill Lynch, SCA is worth somewhere north of $5.00/share. There are some who even talk of double digits for this stock. There may be some bona fide hype about to ignite these shares a lot higher in the days and weeks ahead. A lot will depend on factors that I do not understand, ergo the characterization of SCA as, A pig in a poke.

The technicals are present, as is the story (murky as it may be), so the trade is confirmed, close your eyes, let us pray............

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HYGS - update

A reader asked for an update on HYGS. It was highlighted on July 1st at $0.90 and ran up over $2.00 from there. As these charts show, it is in a consolidation pattern that appears to be near completion. The Daily chart shows an imminient break, either up or down. The Weekly chart traces the recent action between Fibonacci levels.

DAILY

WEEKLY

My personal entry was $0.70 on HYGS, giving me a 200% gain above $2.10. I was stopped out when the stock fell below $1.50 for a net 100% gain. I am looking to re-enter as soon as this no-mans-land consolidation is over.

AAPL

I love my new MacBook Pro, as I did my old Powerbook, as I do my daughters' MacBooks and iPods. With each of their birthdays coming up in the next five weeks, Steve Jobs did me a favor coming out with the iTouch, "I'll take two, please."

Sounds like a Bullish case being made on the Fundamentals. Mais Non! Let's not confuse anecdotal analysis with a horrible looking chart.

First, a Triangle Chart showing AAPL is in the early stages of a Triangle Sell.

Next, let's look at another weekly chart with channels.

On the chart above, AAPL looks like it wants to fall all the way back to support, which is in the area of the March lows around 120. Note also that the MACD is just now crossing over to the downside, signaling many more weeks of decline ahead.

With AAPL closing at 154 today, a drop to 120 or thereabouts would be quite a move. The roadsigns I respect most are all pointing to a rough summer for AAPL shareholders.

When the smoke clears, AAPL should be one heck of a buy going into the fourth quarter, Christmas buying time for Mr. Jobs and his most excellent Company.


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NNVC - Intriguing

We have an intriguing little mystery today from NNVC, with only good explanations.

Earlier this morning NNVC issued a press release announcing that, "...Renowned Japanese ophthalmologist and corneal researcher, Kazuo Tsubota, MD, PhD, has agreed to join the Company’s Scientific Advisory Board."

The press release also slipped in this little tidbit:

“I have already had licensing discussions with Japanese pharmaceutical companies regarding EkcCide™,” said Dr. Tsubota, adding, “There has been significant interest in Japan in the excellent animal study results from the Institute in New York.”

“Dr. Tsubota will be helping us prepare the Company’s nanoviricides drug candidates to enter the regulatory approval process in Japan. Initially, he will focus on viral eye diseases such as EKC and Herpes virus infection, among others,” said Eugene Seymour, MD, MPH, CEO of the Company.

What I find so intriguing is that in a press release dated June 30, 2008, NNVC announced that this same Dr. Tsubota, "...Has agreed to perform confirmatory animal efficacy studies of the nanoviricide anti-EKC drug candidate, EKC–Cide™, against EKC (epidemic kerato-conjunctivitis) in Japan."

In between these two releases there has been no news as to how that confirmatory testing in Japan was going. Yet the renowned Japanese ophthalmologist, Dr. Tsubota, has not only agreed to become a member of NNVC's Scientific Advisory Board, he is, according to the press release out today, already, "...In licensing discussions with with Japanese pharmaceutical companies regarding EkcCide.™"

What can be gleaned from all of this? Whatever Dr. Tsubota has seen in his review of EkcCide™ has impressed him and is significant enough that Dr. Tsubota wants to be part of Nanoviricides and wants to represent the Company in Japan.

In due time, all of this will make better sense, as whatever pieces of this puzzle may be missing, they can only mean good things of NNVC.

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VISN

In the Comments from last week, someone asked for a China pick. Readers, be careful what you ask for. VisionChina Media popped 22% on Friday due chiefly to great earnings and guidance. The issue is whether that gain is the end of this move, or just the beginning? The weekly chart below says it could be either and this week's action will provide the answer. Below the charts there is an assembly of fundamental facts and opinions that strongly favor continued upside.

TECHNICALS

Below is a daily chart tracing out a Head & Shoulders bottom.

FUNDAMENTAL CONSIDERATIONS

VisionChina Media Announces Second Quarter 2008 Results and Raises Full-Year Guidance

July 24, 2008 5:00 PM EDT

BEIJING, July 24 /Xinhua-PRNewswire/ -- VisionChina Media Inc. (the "Company") (Nasdaq: VISN), one of China's largest out-of-home digital television advertising networks on mass transportation systems, today announced its financial results for the quarter ended June 30, 2008.

Second Quarter 2008 Highlights

-- Total revenues in the second quarter of 2008 grew 332.4% year-over-year and 48.8% quarter-over-quarter to $20.3 million, out of which advertising service revenues grew 405.4% year-over-year and 52.4% quarter-over-quarter to $20.2 million.

--Net income in the second quarter of 2008 was $8.5 million, an increase of 56.7% from $5.4 million in the first quarter of 2008, and a significant increase of 3,039.7% from $0.3 million in the second quarter of 2007.

-- Gross profit in the second quarter of 2008 was $11.9 million, an increase of 64.5% from $7.2 million in the first quarter of 2008 and a significant increase of 775.5% from $1.4 million in the second quarter of 2007.

-- Operating profit in the second quarter of 2008 was $7.8 million, an increase of 71.1% from $4.5 million in the first quarter of 2008, and a significant increase of 3,210.8% from $0.2 million in the second quarter of 2007.

Those are some blow out numbers for VISN. But there is more to the company then last quarter's numbers:

Jim Oberweis' favorite small-cap stocks

“Other names I think being overlooked are companies such as VisionChina Media (NasdaqGM:VISN - News), which is a Beijing-based operator of an advertising network that has 39,000 digital TV displays, which are placed on buses and subway platforms in 16 cities in China.

“VisionChina will be a beneficiary of the Olympics primarily because advertising rates are expected to surge as we go through the Olympics. That said, I don’t think that’s a reason to buy the stock. A reason to buy the stock is because it has a great franchise of virtually monopolistic exclusivity that advertises on buses throughout many cities in China.

"There is typically one single license for wireless broadcast that is afforded to every city in China, so in order to secure a long-term contract, [VisionChina is] the only game in town that is permitted to do this.

“With that license it is securing long-term contracts, and some of those contracts are for 10 years, but some are as long as 50 years where essentially the cost to Vision is fixed, but the advertising rates are likely to be variable.

"My guess is that over the next 20 years the advertising rates within China are likely to increase, consistent with the growth in the middle class within the VisionChina market place.

“VisionChina has come down in valuation, but it’s had a terrific year overall so far. The stock is up about 85% so far this year, but it’s down from a high of roughly $23. The stock is down for no particular reason that we can find. I just met with management not long ago. I think it’s probably one of my favorite names right now anywhere in the world.”

Links:

Vision China Media Signs Exclusive Contract with Shanghai Metro

Vision China Media website

DUG - Update

DUG was first highlighted here on July 2 (that special day for me, every year). It closed on that date at $27.89. A couple weeks later I reviewed DUG's progress in my July 15 blog. It closed on July 15 at $32.59. Today DUG closed at $36.69. Let's take a closer look.

The chart above reveals a Triangle Buy signal on July 3rd at 29.08 and DUG is in little danger of any reversing Sell signal.

This is an updated version of the orginal Weekly candlestick chart. There are three resistance lines drawn on the chart at about 40, 45 and 50.

Finally, here is a Point & Figure chart, citing a recent Ascending Triple Top Breakout which projects a target for this run of 57. This gives us targets that range from 40 to 57, so DUG is another 10% rise away before even the most conservative target is met.

The DUG trade is a nice winner, up about 33% in the stock and well over triple digits in the October 30 call options.

Trades like DUG are the reason that only half of the trades need be winners. That gain on the options in less then one month covers any losses during the month plus a nice profit from what is left over. But the month is not over and I've moved my mental stop up to a win of +100% on this trade. Not bad for a worse case scenario going forward.

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POT - Update

As someone noted yesterday, the Potash SHORT idea from July 7th is finally coming around.

The Triangle chart above shows a Weekly Break-Down Sell Signal July 1st around 215. The previous Buy signal was on April 3rd at 165.


This is a quickly updated version of the chart from the July 7th post. Note how 200 represents the bottom of the up channel; anything below 200 is bearish and a close back above 200 into the channel would not help the bearish case. But the MACD is suggesting the Intermediate Trend is turning DOWN.

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MKTY

Who (besides me) would buy a stock that is already up 40% today and 200% in the past two weeks?

TECHNICALS

Triangle BUY June 16th @ 0.87.


Targets 6 (50 day MA) and then 10-12 (resistance).

FUNDAMENTALS

Click images to enlarge.

Link to company website.

Link to above story.

Link to above story.

Insider Buying Past Twelve Months

The Trade: MKTY has a market cap of slightly less then $20M. They have a proprietary fuel cell battery for small electronics that lasts months. They have deals going with U.S. Department of Energy, Samsung and an unnamed major digital camera developer. They have no debt and just shy of $2/share in cash. All of the above, plus insider buying and it's valued at only $20M.

While I try to figure out why, I'm in at $4.20.

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MWY - What did we learn today?

Around forty minutes into trading today, I had accumulated about a half dozen frantic e-mails, "......is it too late to Buy?" I take great pride in not answering such questions, not directly anyway. But it does raise an important trading issue, i.e. if you've done your research and are ready to buy a stock, what happens if you are so right that it gaps up and doesn't look back?

I'll share with you two answers, one, what I did today and two, what I suggested be done by others.

I. Buy at the Open. Since I already established a position on Friday at $2.80, it was easy for me to buy more on the open, this time at $3.08. If you recall, my initial heads-up on MWY was pretty scantily researched. On Saturday I did a more complete examination of MWY and posted my results. It was clearly a Buy and especially if it popped above $3.00. By today's Open, that was a clear path MWY was taking so without hesitation, I finished establishing my position.

II. Buy on Dips. By the time the questions rolled in as to what to do about MWY running, it was way too late to tell people to buy at the open. Since even the strongest of runs include dips, that was the next best strategy, buy on the dips. As the chart below shows, there were two clear dips during today's 35% run. The first occured around 11:00 AM EDT and the second around 1:00pm.

All of this is much easier said then done, I know. But don't forget the targets for MWY are pretty high relative to stock price, 100% above Friday's close, or better. So buying the stock after it has risen 10-20% still retains most of the expected gain, even if the stock comes back on you. Looking back from $6.50, does it really matter all that much if you paid $3.00 or $3.30 for the stock?


III. New Targets. Here is a new chart, a monthly chart (with Triangle signals) on which I have placed a couple resistance lines, one at about $8.00 and the second at about $10.00. If MWY closes this week above $3.00, this range will become my new target.


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