To OTC Journal Members: 
 

Hot China Stocks Cool Down: Two Noteworthy Situations

The China meltdown seems to have about run its course. The catalyst for the violent sell off in some of these high flying, red hot China stocks has been Rino International. Check out this chart.

RINO, the poster child for a hot China stock in 2009, has gotten clobbered of late. This wastewater treatment company was a BB stock at $3 a year ago. The stock traded up over $30 earlier this month, and was trading at a lofty PE of close to 20 when the stock printed at $30.

The company managed to complete a $100 million secondary at $30. When the stock broke "syndicate bid" in the recent sell down, it really fell apart. RINO found it's way to $20 in a few short trading days and murdered the participating institutions.

I believe the timing of the RINO financing and subsequent collapse of this big momentum stock contributed to the recent sell down in a few very worth China situations. Here's a couple of opportunities coming out of this knee jerk reaction:

There's a couple of really good technical and interesting situations worth updating. Let's start with my #1 pick- China Education Alliance. I believe the company could earn as much as $1 per share this year. Last quarter the company dished up $18 million top line- net $4.1 million for $.16 in EPS for the quarter.

Since the company has likely more than $50 million in cash ($2 per share) and zero debt, expansion could be very rapid. I see $.20 in Q4, with further increases throughout the course of 2010.

The big news here: after graduating to the AMEX from the BB last year, CEU is now graduating to the Big Board- the New York Stock Exchange. You won't see a change tommorrow, but at the open it will move from AMEX to full NYSE.

This opens the door to some further institutional sponsorship, and a better valuation. I love the way this chart set up in last week's pullback.

I'm looking at the chart since last October when the current uptrend began. Note the stock did not pullback below the trend line (diagonal green line). 

Also, look at the Fibonacci Retracement levels. The stock pulled back a little below a 38.2% retracement, but didn't come close to the next level. Uptrend for this one confirmed, and a smokin' buy in my view. 

I first alerted you at $5.60, but my longer term price target remains $14. I'm simply holding the position I own at about $5.70.

China Recycling Energy (CREG) is worth a mention as well. This stock has been a big win for us, but really sold off hard yesterday, and it will take a day or two more to get the scared money out of the stock.

I don't know why the stock got clobbered yesterday. The numbers coming out of the company have been great, and the one analyst who follows the stock raised his price target to $6 this week.

Yesterday was a bit scary thanks to the volume. It was the second highest volume day for the stock in the past 3 years, and the stock shed about $1- $4.75 to $3.75.

As you can see from the chart, this stock has run pretty much straight up since last summer, so a correction was both long overdue and welcome. Technically, this stock needs to hang in around here. I'm sure yesterday's big drop scared a few folks with profits in this one, and there's some scared money coming out right now.

I don't know of any fundamental change at the business, and their revenue model eliminates the ups and downs of a project driven top line. The stock has now pulled back to a perfect 61.8% retracement. The volume is moving back towards the average of about 88,000 per day today.

I'd love to see the stock stabilize on lighter volume. Then I'd know the scared money came out, and it was time to take advantage of this opportunity. The only real negative here- I 'd like to see the stock find its way back above $4 to meet the minimum price threshold for NASDAQ- I believe they are pretty close to a listing.

Of the roughly 65,000 shares I own- I bought them at $1.31 quite some time ago, I've only sold about 10,000 up near the $4.50 to $5 mark. I've still got a nice profit, but no one's getting my shares at this price unless I need the money, which I don't right now. In the case of CREG- I believe it's "Attention KMart Shoppers"- A bargain basement steal. Pounce now.
 

Spicy Pickle (OTC BB: SPKL) Acting Perky

I know it's been a while, but my troubled restaurant story is finally starting to come back in earnest- both on the technical side, and the growth side. 

Today, about mid morning, SPKL announced the opening of two more Bread Garden restaurants in British Columbia, both in downtown British Columbia in high density areas.

This is the third Bread Garden that has opened recently- the other being on the plaza at Whistler Mountain- the site for the Alpine events in the winter olympics.

One of the two new stores in Downtown Vancouver is located in the CBC Headquarters building- the Canadian Broadcasting Company. It will be busy during the Olympics. There's a Bread Garden at the Vancouver International Airport as well.

In all, this brings the total to 15 Bread Garden Urban Cafes that have been opened since Spicy Pickle acquired the brand.

Penny stock lovers might want to take note of the action in this little $.10 stock. Back in mid December, volume began to materialize. Note the stock has been in a nice incline back up as the volume bars increased in size. 

There is clearly accumulation going on in this stock, and there is more good stuff to come. I love it at this level, and believe it coud be an easy double over the next few months from here. Activity is increasing both domestically and in Western Canada.

New stores are under construction in Vegas, Texas, and California. Western Canada continues to expand. A new franchisee signed on in Montana.

In the spirit of full disclosure, I inform you I recently purchased 500,000 shares from one of the founders in a private transaction for $.06 per share. He needed the money. I liked the price. Those shares are restricted from sale for 6 months. 

If you add that to the other million shares I own- most with a cost basis of about $.25, I'm in line to make a serious return if the stock really heats up. Looks like it's going to. The company, after a very rough 18 months, is headed in the right direction.

Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com