To OTC Journal Members:
 

Trading Alert: Project Group (OTC BB: PJTG)

Followers of the OTC Journal's ideas in the penny stock arena should be noticing an emerging pattern. Several of the microcap situations I cover have begun trading very well on increasing volume since we turned the corner to 2004. This is commonly known as the "January Effect". It tends to have the greatest impact on the smallest stocks.

Stocks which have begun to appreciate off moderately depressed levels include FMLY, AVWI, HYPD, and TTGH. All of these issues have been climbing the charts on increasing volume since December tax selling and portfolio adjustments abated.

One stock I feel will do extremely well in 2004 has yet to join the party. I believe Project Group should arrive at the party on Monday. The stock has not begun a rebound phase, which is why I'm excited about the opportunity to feature it in this weekend's edition. 

The company came out with outstanding news after the market closed on Friday. In my mind, the current trading level equals opportunity. The two previous editions I have written on this company have resulted in profitable short term moves, and I believe the stock is positioned to yield the same result.

For those of you who need a refresher course, Project Group is the world's leading integrator of Microsoft® Project, Microsoft's enterprise software solution. For more information on their business model, please review my November 22nd edition. Enterprise software is only the 4th largest segment of Microsoft's business, but it's the fastest growing. If you want to participate in the growth of Microsoft's Enterprise software sales, Project Group offers an excellent proxy. Project Group boasts Wal-Mart, Halliburton, Waste Management, and Texas Industries Inc amongst its current client base.

Friday, after the market closed, Project Group announced it landed another big fish. Devon Energy (AMEX: DVN) has retained Project Group to provide advisory services related to the implementation of Enterprise Project Management with Microsoft's Project 2003. Devon Energy is the largest independent oil and gas producer in the United States. When reviewing the news release, I noted it also appeared under Devon's ticker symbol. This should bring Project Group onto the radar screen of a large number of new potential investors.

The company expects to report about $2 million in sales for 2003, but sees revenues increasing to at least $6 million in 2004. This growth is the direct result of having added 12 new clients to their customer base over the past 6 months, and reasonable expectations for a few more new clients in 2004. The addition of Devon Energy to their customer list lends credibiltiy to their $6 million forecast.

As you can see from the chart, the stock began to make new highs in November. Since the initial spike, the highs have been getting higher, and the lows have been getting higher. The stock is parked in the center of a 50% retracement of November and December's action, suggesting it is ready to begin a rebound phase. In addition, volume has dried up to anemic levels. The lack of volume suggests sellers are exhausted. Therefore, a surge of buying could easily lead to higher levels.

The entire market value of the company in the $.20 range is a minuscule $10 million. With expectations of $6 million in sales for 2004, the stock should be entitled to trade into the $.40 range over the longer term, and is overdue to challenge the $.25 to $.30 range in the short term.

If the stock gaps up on Monday morning, wait for a pullback. A limit order in the $.22 to $.23 range is suggested.

Here is the complete text of the news release for your review:
 

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