Monthly Archives: June 2008

Pickle’s Recent Price Action

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Jabil Circuit’s (NYSE: JBL) strong earnings and forecast has been a feature of financial media sites and networks all over the news today. The stock’s up almost 100% as I write from its all-time low of $9.03 back in March of this year, and has provided quite a lift today for most of the cell phone sector. If you would have bought JBL when it capitulated to an all-time low on huge volume back in March of this year, you would have been heavily rewarded today.

What does that have to do with the Spicy Pickle? Quite often the market proves over and over again the best time to buy stocks is when nobody wants them. Hence, the Pickle in the last two days appears to be a victim of nothing other than seller/sellers not wanting to own the stock any longer. The stock traded as low as $.69 cents this morning on slightly higher than average volume.

This would have thrown up a potential red flag to us if there were some significant corporate events that warrant the selling, but that simply doesn’t appear to be the case. If anything, maybe getting some of these anxious sellers out may end up being a good thing for SPKL shares in the future.

In other words, if you liked the Pickle as an investment prospect on Friday, then yesterday and today pose an even better buying opportunity for the long haul. It’s not much different than buying a product on sale when the product itself hasn’t changed. The Company continues to execute and we believe its growth plans are firmly intact.

Bottom line? My experience tells me the last few days will prove over time to have been a great buying opportunity for SPKL investors.
 

Short Closed- Off Next Week

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For those of you who are following my short recommendation, I closed all positions out today about mid morning.

I ended up making a net profit of about $3,000 in my 2,000 shares of QID, and about $1,000 in my put options on the QQQQs from Tuesday. Added to the $1700 I made on the early options trade, my net was around $5,700 from being short on and off over the last few weeks.

I closed the positions out because I will be traveling all next week, and completely away from the computer. You have to be fairly nimble on these kinds of trades, and I was uncomfortable being completely out of touch with civilization with this trade on. I will be on a family vacation from the 23rd to the 1st, and I’ll be in an area with no telephone or internet. Hence, the decision to be out.

I still believe the NDX has a date with 1907- we’ll see where we go from there. I am moderately bearish on the markets as a whole through July, then I think we will power higher. There will be some great bargains to be had mid summer.

Larry’s Look at Today’s Market: 6/17- CREE Stars Today: 3:25 Pacific

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There were two highlights from today’s trading action in the markets- first- the market tried to roll over and sell off after I suggested getting a little shorter on the last three day run up.

Secondly, for some inexplicable reason, CREE made a half way decent move today on moderately improving volume.

As you can see from today’s price bar, CREE traded to $27 before dropping back a bit. The last time I suggested getting aggressive with this stock was when it gapped down big on the Q1 earnings disappointment at the end of April at about $25.

CREE tends to trade very well when there’s a lot of media talk about the importance of evolving from incandescent bulbs to the new generation of chip driven LED bulbs. They last ten times as long and use 1/10th the power.

When the company has to deliver on numbers, it seems to disappoint Wall Street every time in a fairly big way.

In the early going I was convinced this stock would head to $50. I have withdrawn that opinion. They keep falling short on numbers, which means they don’t have the horses to get it done.

I don’t know why the stock traded up today. However, I believe it wants to fill the April gap and head back up towards $30. When (and if) it does, I am going to sell the stock and wait for another opportunity when it gets clobbered. Perhaps there is some international media on LED bulbs driving the stock right now. I’ll check the news feeds in the morning.

Aside from CREE, the market appeared to want to roll over tomorrow. We’ll see about the headline driven news and subsequent market move in the morning.

Aside from those two stories, it’s all quiet in microcap land, with no major change in the last day.

Larry’s Look at Today’s Market: 6/16- 3:25 Pacific

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I should have been watching the market, but instead I was watching golf today at the close. It was far more compelling entertainment as San Diego was front and center in the world today with Tiger Woods battling it out in an 18 hole playoff with ancient warrior Rocko Mediate. It went into extra holes, with Tiger simply outlasting the poor guy. I suppose Rocko wouldn’t have gone down in history as the greatest golfer ever win or lose, but you couldn’t help but root for the underdog.

The market has been rebounding the last couple of days after last week’s drubbing, and it’s setting up for me to get shorter, which is kind of what I was hoping for.

Had I been right on top of it last week, the NDX did hit my first target level for a nano second, and bounced. I would have sold had I been watching like a hawk, but I wasn’t and therefore missed the opportunity.

Here’s the chart:

As you can see, the NDX hit the 38.2% retracement level of 1907 and promptly bounced. I missed it, so I’m hoping for another chance.

My new target to get even shorter on this index is 1999- let’s just say 2000 to round it up. It’s the 61.8% extension of the correction, as shown on the chart. At that point, I will add to the position in either options of QID.

If it gaps up a little tomorrow, I’ll go in deeper and take my chances. A weak opening will have me on the sidelines until better opportunities appear.

In other news, there is literally nothing to report in microcap land. PNWIF has pulled back some, much to my disappointment. I’d really like to see it hold up over $4 to give it the best chance of getting a NASDAQ listing. I believe the Costco service has started and it’s going very well.

SPKL continues to languish between $.80 and $.90. No new buyers are surfacing, but there’s no real appetite to sell either. The company opened #40 last week, and more are coming in short order.

NIHK still remains on the quiet side. I haven’t heard from Doug Saathoff in some time despite my efforts to reach him, and TCGD remains in a clearance process with Homeland Security. EFSF is trading as if the direct response campaign is getting a slow start.
Lots of indications of interest for my microcap oil and gas idea- so I shooting for Thursday post close to give you guys the 411. It looks like a good speculation, especially at the current price.

The eFoodSafety Limbo: How Low Can You Go?

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Time for an update on eFoodSafety. The stock is not trading well. For all those who haven’t noticed, and I’m sure everybody has, the stock is trading at a new all time low.

What’s the problem? In my view, the market is making the assumption that the Direct Response campaign they launched around March 1st is not delivering exhilarating results. In fact, the company has not provided any disclosure that would give investors information suggesting the DR campaign is generating any kind of major result. Their last disclosure used the word “Moderate”. Here’s the quote: ” The results to date of the direct-response campaigns have shown an initial moderate increase in product sales.”

The press release went on to state the DR campaign had generated traffic to the ecommerce web sites for Cinnechol and Cinnergen far in excess of expectations. The problem- conversions to customers- implication- interest positive, but not closing the deal. Modifications being made.

I visited the ecommerce web site today- www.cinnergendirect.com- The video ran fine in my browser, and the content looked relatively compelling to me. I believe it was slightly different than the original version, and perhaps is now generating better conversions.

It was never my expectation sales would go through the roof as soon as a few commercials ran. In fact, in my interview with Tim O’Leary, CEO of Respond2, he suggested these kinds of campaigns are often successful after a period of trial and error.

Technically, there’s no way to sugar coat the truth. The stock is a mess. $.165 had served as support since October of 2004 when this stock first traded.

I had set my SSL (suggested stop loss) at $.16. Therefore, if you are still holding the stock, it has either not dropped to your personal SSL, or you are simply a long term investor, in which case you don’t care about a stop loss level.

Technically, I can’t call any sort of bottom. We are into uncharted territory. Here’s a long term chart as measured on a weekly basis since it first started trading:

You can see the blip to a new all time low. I’m not sure it’s a fundamental issue. I believe it’s more group related and seasonal. The stock is already trading as if we were in the heart of the summer doldrums. Low volume drift down.
Also, with recession looming and gas prices rocketing, discretionary consumer non durables is not the hottest group on Wall Street.

The company is in the lengthy process of developing a number of natural and non toxic health care solutions. These kinds of products have a big future, but money is tight now- even for speculators.

I’m still sticking with the theme I have stuck to throughout 2008. For the OTC Journal, they have until the end of 2008 to demonstrate they are capable of generating $8 to $10 million in annual revs. If they do it, I’ll hang in there and be excited. If they don’t, I’ll drop it and move on.

On May 1 EFSF entered it’s fiscal Q4. This means their year ends July 30- we won’t see a 10k until the end of October, and then a 10Q will be do shortly thereafter. It’s a ways out.

This thing is due for a break pretty soon. I have seen a number of smaller issues make new lows, shake everyone out, then rebound. If you’re looking for me to pound the table and say it’s a screaming buy, you will be disappointed. I can’t say that. It might be, but there is no technical data to suggest it.

I don’t know where the bottom is, but we’re due for a positive development. Perhaps a surprise on PurEffect.

If you are brave soul who’s not risk averse, get into this stock now. If you’re one of those kinds of guys who believes you have to buy when no one wants something, and the tide will turn, this could be a tailor made opportunity for you.

Technically, I cannot call this one a trade, so I would recommend traders stay away. I don’t believe there’s a lot of downside risk from here, but it’s impossible to call this the bottom. It might be. Time will tell.

As always, comments and questions are welcome.

Another Day- Still Short

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For those who are wondering, I am hanging in there on my short position by being long QID. I have a nice little profit today, but I lowered my cost basis by scalping a quick trade at the end of last week with a put option, and I’m going to stick with it.

In fact, once again, I’m looking to add to the position. Here’s a chart of the NDX- the index that goes up and down with the NASDAQ 100.

As you can see, the NDX bounced a little today. If it bounces more over the next few days, my intention would be to add to my position- possibly when it regains either 38% or 62% of its fall.

If it continues to head down and ends up closing below the yellow support line you see in the chart at 1945, I believe it will be headed for 1908- I just can’t say how soon.

In either case, I believe it is headed for 1908. Whether it makes it down to 1817 is dicey. The DOW and S&P 500 have both completed full 61.8% retracements of the March to May move up, and probably don’t have a lot more downside.

Let’s see what happens tomorrow. A little bounce here might be just what the MD (money doctor) ordered.

Comments and questions are welcome.

PNWIF: Comments From Analyst

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Analyst Eric Wold of Merriman was out with some comments on the recent quarterly financial filing from PhotoChannel. Here is a brief version of today’s commentary:

“PhotoChannel: COST launches on PhotoChannel; confident in Sept quarter profitability - Merriman (4.00 -) : Merriman notes COST launched on PhotoChannel Network’s solution — after a few months of delays and last-minute push-outs caused by issues that Snapfish encountered with transferring customer data and digital photos over to PhotoChannel. Given the start-up launch expenses already incurred during both 2Q08 and 3Q08 in anticipation of the Sam’s Club and Costco launches, firm believes that most of the one-time expenses will be behind PhotoChannel before the start of 4Q08. Coupled with an estimated $2mln+ in transactional revs to be generated during 4Q08 at 90%-plus gross margins, firm is increasingly confident in PhotoChannel reaching profitability during 4Q08.”

He is saying he believes PhotoChannel can return to profitability in Q4’08- to PNWIF, Q4 of ’08 is July to September. He is banking on the Costco business to deliver $2 million in transactions at 90% margins during the quarter.

Then, we head into their first fiscal quarter, which is our Q4, and generally a blockbuster for the company.

It would appear from his comments that he believes the Costco service has already started. I don’t believe that’s the case, but I do believe it could be any minute now.

One positive from my point of view- PNWIF took all the costs associated with the build out of the infrastructure as immediate expenses. While this makes the losses look deep in the short run, it improves financial performance longer term as there won’t be amortization expenses down the road. When the revs flow in, the profits won’t be hurt by as many non cash expenses.

In the meantime, the stock seems to be pegged at the $4 plus a couple of cents level- it’s staying in shape for a possible NASDAQ listing. It might be a good idea to be in before the NASDAQ listing materializes, if it does.

Comments and questions are welcome.

This Seesaw Market is Making Me Nauseous

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The stock market is getting ready to break big time- the only problem? I’m not sure which way.

In favor of a strong market surge- the strengthening dollar (see a chart of UUP), and declining oil prices (the two might be going hand in hand).

The market was up nicely today in the first few hours of trading. Then, in a speech from Bernanke, he used the word “inflation” 29 times- hence the sell off, and the corresponding stronger dollar.
I keeping going in and out of the money on my trade in QID- I have been up nicely three times since entering the trade, and down a bit three times as well.

As long as the market remains stuck in this range, I have to assume I own QID a little too high. Therefore, when the next big sell down in the market comes, I will lock in my profits and look to take advantage of this range bound but fairly volatile and trendless market.

Here’s a chart of the QQQQs to give you an idea of whence I speak:

My bet has been the QQQQs are ready for a real correction after the post March two month unabated run up. However, as you can see, QQQQ is just griding in an ever tightenting range. The highs are getting lower, but the lows are getting higher. That’s a trendless market. It is due to break out of that range one way or another in a much bigger way pretty soon. Which was is the big questions.

Therefore, next time QQQQ gets down to the support trendline, I will sell QID and hopefully make a profit. If it goes up to the resistance line, I will buy it. I’m hoping to make some money using this strategy. Remember, QID will trade the opposite of QQQQ.
There are a lot of cross currents in the markets right now, and it’s really tough to call which way it will break.

On the microcap front- some comments for the Merriman PNWIF analyst for your review in a second BLOG, and other wise no significant break outs or break downs to report. Not much excitement right now, but that’s the way it can be sometimes.

The Market Continues To Tease Me

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My thesis that the market is ready to stage a correction seems to be right one day, wrong the next.

I’ve been looking for the right time to get shorter the market. My 2,000 QID keeps going in and out of the money- never really make too much or losing too much.

However, I did like today’s action in the markets, and bonds were strong, forcing stocks lower. Lately, there has been a disconnect with both stocks and bonds moving higher together- this is not usually the case. When money flow out of bonds, it pushes stocks higher, and vice versa. I continue to believe we are still in for a correction, and hope to get fully positioned to take advantage if and when the time comes.

Oil came down nicely in conjunction with Bernanke talking up the dollar- this works against my correction thesis, but is good for all of us in the long term.
I posted a review of PNWIF Q2 numbers today- there was one minor negative surprise, but great top line growth in their traditionally weakest quarter. The stock has held over $4 post making a fast run to $4.20 after announcing the deal with Kodak China. The Merriman analyst still sees the company delivering $.33 per share in fy’09. If the market is going to fully buy into that number, it should start pricing it in over the next couple of months. This one could be in line for a NASDAQ listing in fairly short order.

In other news out of microcap land- EFSF bounced off a new all time low. Something good is bound to happen here pretty soon. We are overdue. You have to either sell that one or be a long term investor. SPKL continues to run into a wall at $.90, but on not much volume. Lots coming on that one in June.  PNWIF continues to hold above $4, which I love.

Nothing to report on TCGD- they are in the process of obtaining certification on their technology for US airports. VTOK is doing nothing and nobody cares. CREE- I believe I will sell that one and get out the next time it heads to $30. They are not quite delivering the numbers to my liking.

Photo Quarterly Numbers- Time To Get Going

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PNWIF came out with its quarterly filing for the end of March yesterday. If this were a US company, they would have had to file these numbers by mid May- as a Canadian reporting company, they are allowed a bit more flexibility in the timing. I would prefer to see these numbers sooner, and I believe this is a minor problem this company needs to address if they are ever going to be taken seriously be institutional investors.

I liked the top line number, but was taken back a bit by the balance sheet. They delivered $3.25 million in revs, which was an admirable 147% increase in top line numbers over the $1.317 million they delivered in Q2 2007.

The company lost $2.6 million for the quarter. $1 million of the $2.6 million was amortization, so that is a non cash entry.  $1.8 million was R&D expenses associated with adding infrastructure to fill the pending demand from new contracts- specifically Sam’s Club US and Costco US, bringing the real operational losses down to a very manageable number.
The Costco service is supposed to be monsterous, and could add in the neighborhood of $10 to $15 million in annual revs to PNWIF. Service is supposed to kick off any day now.

I do have some concerns about cash levels on the balance sheet. PNWIF ended the quarter with $4.7 million in cash and receivables, but had $5.2 million in accounts payable and accrued liabilities. This suggest about a $1/2 million cash deficit. Time to get to the next level on revenues and gross profits- go Photo.
I’m not too concerned for several reasons- first and foremost, their fiscal Q2 is calender Q1, and it is traditionally their worst quarter of the year. Their Q1 is traditionally the best (holiday time). Therefore, gross profits will improve from here throughout the rest of the year, and costs should go down as they are pretty much done building out the Costco site and infrastructure.

Most importantly, the stock has given back a little of its gain to $4.20, but is still holding nicely above the $4 threshold, suggesting the hoped for NASDAQ listing is not going to be derailed by this quarterly report and a coincidental drop in the stock price.

Here’s the chart:


As you can see, the stock is coming back a little after last week’s beautiful surge. I would really like to see this $4 level hold. As it extends out along $4, and the volume quiets down, it becomes more and more attractive as a buy for higher levels.

Next we should learn the Costco service has started, and perhaps we’ll see another big surge.

Comments and questions are welcome.