Well, I hate to say it, but technically CPNE is a complete disaster, and this week’s action has swept away any vestiges of hope for a support level to appear. In short, I am now convinced it is impossible to call the bottom on this stock. In my view, this stock will continue to go down until it starts going up- and goes up, closing at higher levels, for a week or two in a row.

Here’s today’s chart:

The last level of technical resistance was $1.44. This is a pretty long term chart, measuring the performance of the stock week by week- not day by day.

The stock has fallen below the very long term weekly 61.8% retracement level, which means there is no end in sight to the fall off. Had the stock held in this area, it could have been a great inflection point for turning back up.

Fundamentally, I have no indication the company is not moving along nicely. Technically, I will no longer even attempt to guess where the bottom is.

If you have recently bought somewhere in here, I would just go ahead and sell it for a small loss, and wait for the bottom.

If you are holding it from higher levels, you have to decide if you want to hold your nose through the technical stench, and hope the company hasn’t fallen on undisclosed hard times, or just go ahead and sell. It’s your money, so the choice is yours. As I have stated, I have no indication the company is doing poorly.

If you’re looking for a culprit to explain the dramatic drop in the stock, a good guess is eFund. There are two main sellers in the recent registration statement- fund manager Jeffrey Feinberg is registering about 2 mllion shares, and eFund is registering about 7 million. Here’s the big difference- Feinberg has a cost basis of $1.90, eFund has a cost basically zero- they just helped put the company together over three years ago. My guess, eFund has figured out a way to pre-sell against their registered shares.
This is just a guess, but they are the only ones out there with enough size to hurt the market this badly and a low enough cost basis to make it pay off for them. Until there are some SEC filings from them, we won’t know.

In summary- I would not open new positions at this time until it is clear the stock has bottomed out. You have to decide what to do with your current position- the choice is yours. Only hold it if you are long term and aren’t going to watch the quote every day. I have no indication there is anything wrong at the company.

Sad, after this stock was so good to us for nine months, but that’s the stock market. I could have published a note saying the stock was even a better buy at these levels, but you read this content because I tell it like it is.

Comments, questions, and general complaints are welcome as always.

CPNE is falling apart again today, and I just don’t know why investors would sell this stock at this price.

Actually, I do know. They are selling it because it is going down. Despite profit levels that suggest a $4 stock, institutional participation at the $9 million level at $1.90, and all the balance sheet improvements, CPNE is still under heavy distribution.

We are now flirting with my SSL level of $1.45- so once again, as is typical of the late spring and early summer, it is time to decide if you want to be a seller and move on, or become a long term investor.

I have watched about $100,000 in value erode of our corporate portfolio in the last few weeks, and a lot more from the January high of $3.43. Despite 20 years of grizzled veteran experience, stocks like this wear me out as much as anyone. In fact, this is far worse than a failed idea. It’s worse because the company succeeded- it’s simply a bad stock. When the companies fail you just sell and move on. No problem. It’s over. However, bad stocks can become good stocks a lot easier than bad companies can become good companies. We have every chance of heading in the right direction again.

I was talking with a good technician today who has been watching this one. He told me he was going to be a buyer today. He likes 61.8% retracements as I do, and he pointed out something I hadn’t caught.

Here’s today’s chart:

This is not a daily chart. It is a weekly chart going back to the stock’s all time low in December of ’05. CPNE traded to an all time low of $.16.

On a weekly basis, the stock has now given back almost exactly 61.8% of its entire gain from top to bottom. This is a pretty long term look, and the longer term, the more powerful and better predictor.

Also of note is the stock’s miserable perfomance over the last six weeks. Five of the last six weeks (as measured by the colored bars) have been down. That’s just abysmal.

Just as I suggested with TTGL a couple of weeks ago, you need to decide if you are long term and want to hold, or simply sell and move on. If you sell, you can always buy it back.

If you have decided to sell and move on, I would wait for a modest rebound. It’s hard to get a decent print when everyone else is selling.

I would be more inclined to buy right now. When these stocks make new lows they tend to blow everyone out and then reverse course when you least expect it.

I wouldn’t be surprised to see some sort of moderately negative announcement come out of the company, followed by a rally in the stock once everyone realizes the whole thing (whatever it is) has been blown out of proportion.

In the meantime, it has been painful to watch this one fall apart, but that’s the market.

I wonder how low the stock has to go for it to become irresitable to traders. We might be there now.

Comments and questions are welcome.

I spent some time today dissecting the Commerce Planet Q1 financial filing, and it seems like the company is full speed ahead. There are a couple of minor negatives, but on the whole it seems like this stock should be trading in the $4 range, yet it can even get through $2.

Here’s a few highlights I pulled out. First, on the Balance Sheet- which is the part that compares the company’s assets to their liabilities:

• End of ’06: $3.6 million in cash; March of ’07: $5.4 million in cash (50% increase in three months)
• End of ’06: $1.5 million in receivable; March of ’07: $2 million in receivables (33% increase)
• End of ’06: $1.9 million in “other receivables”; End of March of ’07: $3.5 million in “other receivables” (these are some sort of credit card hold back). 84% increase
• End of ’06: $7.2 million in Shareholders Equity; End of March of ’07: $10.7 million in Shareholders Equity (48.6% increase in three months).

All in all, on the balance sheet side, it really doesn’t get much better than this. This is truly outstanding performance all across the board, and I really can’t find anything about this performance that doesn’t suggest a much higher value for the company.

Now- let’s look at the Income Statement. This is the part where we see if they are making any money:

• CPNE delivered $13.2 million in revenues, up 50% from Q4 in ’06. A huge gain.
• Gross profits were $10.6 million- CPNE is delivering 80% gross margins
• Net Income was $4.1 million pre tax, up 33% from last quarter
• Net Profits were $3.6 million

So- now we come to an issue that could be interpreted as a negative. CPNE has run out of loss carry forwards, so they are now paying income taxes. $500k was set aside for taxes in Q1, taking the EPS down from $.10 to $.08.

On the stock buy back program- we can see the hard numbers on their level of commitment now. Nearly 300,000 shares were bought back in Q1- those shares are now retired and removed from the I&O.

On the flip side, the company issued 2.37 million shares to someone the filing describes as an “affiliate”- there is no other description to let us know what this award was all about. In another section it is noted the company issues 237,000 shares for services.

Net result: a 2.6 million share gain in the number of shares I&O. This is a minor negative, and I would like some disclosure on why and to whom they issued 2.37 million shares of stock.

The tax paying status explains why revenues were up 50%, but profits only up 33%. The company will now have to pay taxes on an ongoing basis- kind of a high class problem.

So, in review- here are your negatives- shares I&O, despite the buy back program, went up by 2.6 million.

Revenues went up 50%, while profits only went up 33%- primarily due to paying taxes as the company is out of loss carry forwards.

And, of course the biggest question remains- why does this stock continue to trade at such a lousy valuation relative to corporate performance? I wish I knew. We have already explored that issue in some depth, so I won’t go over it again.

Here’s the chart:

I threw in a couple of other indicators I know investors like- specifically the 50 day and 200 day moving averages.

In addition, I put in the long term 61.8% retracement line I used a couple of months back to suggest the stock was a buy at $1.60.

As you can see, $1.61 remains the long term 61.8% retracement level. The 200 day Moving Average is $1.66, and the 50 day is $1.97. This means the stock is in a long term uptrend, but a short term down trend.

If the stock were to eclipse the $1.97 level- which it tried to do today, it would signal it was in an uptrend both short and long term.

So- there’s the chart, and there’s the review of the financial filings. Fundamentally, it’s a very strong buy for long term investors. Technically, it’s neutral right now. If it gets some steam, the technical picture could change.

Comments and questions are welcome.

I almost hate to say it or think it. Why? because visualizing this stock getting healthy is the surest way to sabotage any move.

However, looking at the chart, there does appear to be a “Stealth Rally” going on in CPNE at this time. Long overdue, but nevertheless here.

As shareholders of CPNE, we are all probably better off investing in a company that makes heart monitors- after all, this stock can give you heart attacks. It is about as volatile as any I can remember, and seems to do the opposite of what you expect.

Let’s review- From the January high of $3.40, the stock simply got clobbered when the market learned about the 4.5 million shares fund manager Jeffrey Feinberg bought directly from insiders at $1.90. Those shares are now in registration, and Feinberg couldn’t sell them even if he wanted to.

In its usual fashion, the stock over reacted and sold off to the $1.50 level, before beginning a rebound phase.

Here’s a look at the stock since making its 2007 low. The one day surge up to $2.37 happened when the company pre-announced Q1 earnings results. It was short lived.

The stock then fell back below the 61.8% retracement level, but only for a few trading days. It has since entered a bit of a stealth rally, trying to work its way higher by a couple of pennies everyday.

When I think of CPNE, two adjectives come to mind: Sloppy and Crazy. This stock is both. It seems to want to work its way higher right now.

Here’s the psychology of this stock- the drop to $1.50 simply freaked a lot of investors out. When it rebounded, those shareholders gave a collective sigh of relief and dumped the stock after adjusting their pacemakers out of the heart attack zone.

Now, we have come back to a higher low, and there are less sellers.

I believe the stock will continue to “drift up” for the time being until the real 10Q is filed. I still don’t have the EPS number for Q1. If it’s a big surprise to the upside, the stock will probably get clobbered. If it’s a surprise to the downside, it will probably run up. Who knows?

Here’s what I do know- it was last year about this time when CPNE announced its first break even quarter, and the stock was $.20. It’s been a wild ride since then, but all in all a very profitable one for most of us.

If they continue to deliver the numbers, the year ahead could be as good as the year behind. If you filter out all the noise, the movie is pretty good. You certainly can’t fault the CPNE on the performance side.
I believe CPNE is a buy right now.

Comments and questions are welcome.