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.

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.

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.