Post earnings CPNE blew off in a scary fashion, but with the perspective of a week in the rear view mirror things are looking considerably rosier.

The sell off was a classic “buy the rumor, sell the news” trading pattern, no doubt exacerbated by the shares early financiers have been consistently pumping into the market.

This is not necessarily a bad thing. These guys are making a lot of money, but they also took a lot of risk before the company was successful. Now- three years later- they are cashing in. This is the way it is with all developmental companies- old money gets out and new gets in as the fundamentals justify higher levels. Without them, you might have to pay $3.50 for this stock right now.

As I wrote post earnings- you should only hold the stock if you were prepared to hold down to about $1- we got to $1.18 on Tuesday very briefly. Bargain hunters swooped in.

Here’s a pretty complex chart from Friday’s post close, and it sure looks good. It suggests a couple of scenarios.

First, there have been two major blowoffs in the stock in the last two months- both of which were followed by strong rallies. Note the lows are getting higher with each successive blow out. This suggests these violent sell offs need to be bought.

Secondly,the stock broke above a little mini downtrend line from this past week’s action. That’s a big short term positive. If the stock can trade up just a few more cents, we will have a “double repo” condition- also known as a traders “bread and butter” trade.

If the stock can just find its way about the $1.48 level- a move above the Dinapoli 3×3 moving average, it could break out. Traders look for this pattern all the time. It has to happen within 8 trading bars of the last time it dropped down below the 3×3- in this case it was Tuesday.

Despite the miserable week after what should have been a great earnings move, the stock is behaving like a champ. Last quarter’s earnings justify a much higher stock price, and if the trend continues it should get there sooner or later.

Comments and questions are welcome.

Yesterday’s poor action post earnings release in CPNE has cast the die for a correction in this stock in my view. Despite being one hell of a value proposition based on sales and earnings, yesterday’s negative trading in the stock on earnings release day has set the stage for a major correction.

If you bought this stock a couple weeks ago when it collapsed into the $1 range, in my view you will have another shot to do it all over again.

If you want the most succinct version of the negative side of the story in the case of CPNE, here are the comments of one reader:

“I think your Part II is right, especially about how the market may be signaling a corporate problem. These numbers are great, but only in the sense that the return to early chain-letter and pyramid investors are great. Have you visited their sites? Tried to escape from them? Priced their specials against Amazon? Considered that the retail site competes with the stores created by customers of its wholesale site, at the same price?

The business about the intercompany revenues is upsetting because it’s very clear that you can’t count the money you spend on your vertically integrated cost centers. If these subs were third parties, the expense would count, but not the revenue; since they own their “vendor,” they can count neither, but the reduction in expense generates a return on the investment in the subs.

Any company can claim that it COULD outsource something and so what it spends on that function ought to be counted as revenue. But that’s not what’s done.

And CPNE has not just counted the intercompany revenue, it has made it part of a headline, burying the real thing so deeply in the PR that you missed it on the first read. That sort of overreaching is never an accident - and it is most often a powerful indication of the character of the people behind it. I sold my shares this morning, not because I was waiting for the event, but because the PR, with its inflated numbers and effusive self-congratulation, turned my stomach.

This stock may well go higher as bigger fools buy in, but these guys treat their shareholders as customers of their stock, not as partners in their business. And that stinks.”

This was contributed by one reader in the comment section of the BLOG I posted just as the numbers came out on Monday morning. I agree with some of his comments- particularly those related to the presentation in the press release. I wanted everyone to see the negative side of the story.
The problem here is quite simple: There are more sellers than buyers. Some early investors are probably trying to take money off the table in a market that doesn’t have enough volume to support their appetite for liquidity.

As such, it is my personal view that this stock is now going to go back to $1. My advice- if you are not prepared to hold this stock to much lower levels, sell it now.

I can’t be sure the stock will trade down there. It certainly offers a compelling value at these levels. However, technically it looks like odds are it is headed there.

Here’s today’s chart at about 11:00AM Pacific:

As you can see, the stock has broken below my blue support line, and therefore I personally believe a trip back to $1 is in the cards. If and when it gets there, it will be one hell of a buy.
I don’t know for sure it is going there. I just feel if you are going to hold this stock thanks to the outstanding fundamentals, you need to be prepared psychologically for the possibility of it happening.

Comments and questions are welcome.

I’m dreaming of a Green Christmas- Green for profits- and there is little doubt Christmas is coming early this year with the numbers Commerce Planet delivered in Q3.
In truth- I don’t know what the heck these guys are doing to generate this kind of cash flow, but it is sure working. Subscriber loyalty must be at some kind of new all time high for the company to generate over $6 million in subscription revenue. That equates to something like 200,000 paying members monthly.

Here’s the totals: $9.7 million in combined revenues, equating to $3.1 million in profits: or $.07 per share.

As the company points out in its press release (which is quite unusual)- the PE ratio of the stock on an annualized $.28 per share in earnings is 5.7- this held against an industry average of 26.2- therefore, if the company can simply maintain its current level of profitability and the stock eventually trades at the industry average, your price target is $7.33.

There is one fly in the ointment: There is a discrepency I can’t quite figure out- The press release says the company generated $9.7 million in revs and $3.1 million in net profits. The 10Q says the company generated $7.6 million in revs and $3.1 million in profits. I will try to get to the bottom of this.

So- ask me now if the stock will trade over $2 this year? I believe the answer is yes- perhaps very soon.
Here’s a longer term chart:

This is a weekly chart going back the entire trading history of the stock. All I want for Christmas is the stock trading at a new all time high- that’s all I ask- it could happen today. We’ll see where we go from there.

I’ll publish an edition later today with more details. If you don’t own this stock by now, you can’t say you didn’t have the information.

As far as any futher trading goes- if you buy it today, you should still probably do very well. Comments in a full edition later today.

Comments and questions are welcome.