Penny Stocks

Aladdin Trading is a sub penny stock and I like the way it is currently setting up.  I am going to make this posting fairly brief and stick to the technicals instead of mixing things up with fundamental factors.

The only fundamental thing I am going to say about this pinksheet traded company is that it is in the import/export biz and focuses on unique niche foreign beer brands. Whew, ok got that out of the way… now on to my favorite part, the technicals.

By the way, before I get into the technical analysis of ADTJ, I want to point out that this site, the penny stocks alert primary focus is on the technical analysis setups of penny stocks.  It will and should be the primary focus.  It seems that time and time again I have learned this lesson the hard way, that every time I get too distracted with the fundamental picture of a pennystock, I end up getting either burned (read: losing money) or settling for a much lesser profit.

Fundamentals can end up clouding your brain with pie in the sky numbers! Beware!

Enough of that for now, but maybe I will get into it a bit more in a future post.

Anyway, back to ADTJ.

I like the setup in ADTJ as of this post because since the run began the stock has managed to trade sideways in a nice trading range without giving back to much.  This is key, because anytime a stock rallies and then enters into its first pullback phase I always LOOK with a keen eye to see how much the stock pulls back to define its new trading range.

As a general rule for me, the more a stock pulls back on the first retracement, the less attractive the stock is.

The BEST stocks pull back the least and do the smallest retracements. When they do these small retracements it shows the stock is in strong hands and there is a built in strength to the stock.  It can often hint at the power of the next leg up.

So ADTJ according to my charts has so far only done a 50% fibonacci retracement from where the rally began to the high of .0031.  In the land of sub penny stocks that is a pretty good feat to accomplish! It is one of the reasons I like this stock.

A 61% fibonacci retracement is pretty common as well and is not the end of the world. But what would you rather be the owner of, a penny stock that does a 50% retracement after its first rally up, or a 61% retracement? I thought so…

So we have the 50% retracement showing nice built in strength, and we also have a trading range with a high of .0031 and a low of .002.  That is the magic trading range on ADTJ.  It has been bouncing back and forth between there like a basketball and what this tells me is that it is building cause for the next leg up.

But note! This supposed next leg up is not really activated until we see a break of .0031 on the upside with good volume.  I really do not know how much longer it will bounce within this trading range.  And keep in mind that we cannot rule out a downside break of the trading range below .002. 

Right now it looks like it wants to break .0031 resistance and start the next leg up.

It closed Thursday February 27th, 2008 at .0027.

So in summary what is needed is a break of .0031 with good volume and once (if) broken a solid close for that day.

I DO NOT like to see a stock break out of its trading range and then close near the low of the day or end up back inside the trading range. If that happens, it is bearish and sometimes leads to a move back to the lowside of the range, in this case .002.

So a clear and sustained break of .0031 is what is needed with ADTJ. If it does that then I do not see much resistance until .01

Ok, now that I got your attention.

This OTC BB penny stock , MSTF ( Monarch Staffing) is on very high alert status going right into the 3 day presidents day holiday extended 3 day weekend.

Now you might be asking yourself right now, why on earth am I talking favorably about an OTCBB penny stock on a Friday, and a Friday that is before a 3 day weekend?

It seems nuts, I know. Normally Fridays are slow, lower volume and generally a bad time to initiate any new positions or hold positions for that matter.

But I can tell you with zero doubt, that MSTF has a very high probability of being the exception to this rule.

Right now MSTF is trading at around .01, there are two on the ask at .01 and 3 on the bid at .009.

MSTF again is an OTC BB Stock, so why do I keep mentioning that !? I do because compared to NUBV which I mentioned in a couple previous postings, MSTF since it is OTCBB actually has sec filings and has been good about putting them out.  If you check on yahoo finance you will find that there have been zero press releases.  So what can be discovered from the filings?

According to research from some IHUB members, namely $oldier Hard, realest, bagfull and john wayne.  These guys did some outstanding research on the ‘behind the scenes’ activity through the filings that seems to suggest that MSTF is either going to be acquired by AccentCare ( A 120 million dollar a year business in the senior caregiving biz), or that some sort of reverse merger may take place where by AccentCare gains a quick entry into the public markets. The reason that speculation is coming about is because a number of top executives including the CEO of AccentCare are on the board of directors of Monarch Staffing.  So you really have to put 2+2 together here that something is up.

It is interesting that AccentCare is in the senior caregiving biz, and that Monarch Staffing is in the medical staffing biz. Seems like a perfect fit to me because one of the most pressing functions of any healthcare caregiving type organization is staffing. It is a big issue, and I know because I worked in that field for a short while many years ago.

In addition, a recent SC 13G filing from which came visible on February 6th, 2008 shows that Knight Equity Markets, L.P., formerly Knight Securities, L.P, owns about 13% of the outstanding shares.

Now you tell me, why an high class market maker would take that kind of stake in an OTC BB? hmmmm.

The other big deal is that MSTF has a small total Outstanding Share Count.  Indicated is 30 million, but could be between 30 million and 50 million.

So look at some possible market cap values based on price and various Outstanding Shares totals:

So as you can see, we really DO seem to have a stock that looks very much undervalued here based on a number of different factors, and I have not even begun to talk about the technical analysis aspects that make this a stock chart that is second to none!

Most of the float appears to be held in very tight hands right now. And currently as I type right now, price is holding VERY WELL for a Friday, and a Friday before a long 3 day uncertain weekend too.

There is also an extremely interesting possible cycle analysis which I noticed going back exactly one year on MSTF that seems to suggest an almost exact repeat of what happened back then, will happen again in the current time frame.

It really is a fascinating type of correlation and is only something you would notice if you have been following markets long enough to understand that sometimes things beyond just fundamentals or technicals rule the marketplace.

Just as a hint, look back exactly one year from this February 2008, all the way back to February 2007 and see if you can find any parallels.  Use the Presidents day holiday weekend in both years as your guide.  More on this later.

But for now MSTF is looking very strong with strong support, good volume behavior, price action before the weekend and setup for next week.

Of course I cannot tell you with certainty that MSTF Monarch Staffing will be bought out!, or that a Reverse Merger will occur.  That is speculation, but it is informed speculation, not just reckless speculation.

How high could MSTF go?

I really do think MSTF has a strong chance at reaching its 52 week high of .15 cents again, and it may get there a lot sooner than you think.

But for now, I will put a target between .05 and .15

After you look at the market cap chart above, my targets may actually be conservative.

I will try to get into a few more details about the technical picture on a future posting.  From a technical standpoint, this penny stock chart is about as good as I have ever seen.  It has so many elements necessary for a good run. And to find a chart, and a story like this one in combination is quite a rare thing indeed.

Peace…

When I first mentioned Nutripure Beverages over here at the Penny Stocks Alert it was trading at around .0003 .  Not too much time passed before it started building an uptrend, all the way to an intra day high of .0014.

So percent return range from .0003 to .0014 is 366%.  But of course it is usually impossible to sell the tops and buy the bottoms.  But any percent return between 1% and 366% is just fine with me.

The problem with NUBV seems to be the dilution issue. All the while I was watching this stock trade on Level II, it really seemed obvious that the enormous amounts of volume would be hitting the ask and yet the ask took forever to move. But then, the moment the bid was hit with a few sales they immediately thinned it out.

That type of action seemed to be happening almost all the way up.

In addition, the breakout above .001, while on extremely heavy volume was honestly somewhat disappointing.  When you great a breakout of a significant resistance line, you really want to see wide price bar spread combined with the volume, not just the heavy volume.  The reason is that if you do not get the WIDE price bar spread, or wide enough that is, then it starts to become obvious that what is happening is something called ’shortening of thrust’.  Basically it means that all the big buying power is being ABSORBED head on by selling and preventing price from advancing.  It is usually a very bad sign and probably a bad sign of heavy dilution as well.

The RSI on a daily basis was still around 50 range when we were in the breakout area… so it did have me thinking that NUBV had a lot of room to run before being overbought.

And after that so called breakout, I really DID want to see that NUBV could now hold support at .001.

But guess what?

It did not hold that support that good and it started becoming sloppy.

BZZZZZZZZZZZZT !

Wrong.

After it started to fail at holding that support after the supposed breakout, the red alarms should have been ringing in your head.

Surely it seemed that NUBV had some sort of ’story’ going for it. They have a patent for what seems like a great idea and a great product with a possible bright future.

But with the bloated capital structure, the heavy dilution and the questionable trading behavior, it is time to look elsewhere.

But still! Even after all that heartache, as a careful and prudent trader you most likely could have snatched between 10% and 366%.

NOT BAD.

RVGD has done really well since the previous post on this stock. It is quite amazing actually that it played out so predictably.

In my previous post I talked about how it needed to rally real strong back to .0034 level to give it a good shot at making a breakout type run like it had in the past. 

RVGD did exactly what I asked and surged with big volume since then all the way to an intra day high of .017

The .017 price gave an RSI reading very near the 80 range which was clearly an overbought level on the daily charts. By the way, RSI in my past experience is a great tool to use to help determine exit points and maximize profit.  Anything between 70 and 90 is a good excuse to take profits.

This entire run began quite early and was motivated by a pretty significant press release about a large revenue generating contract which came out the day before the price peak day.

So this was definitely a good setup. Does it have more to go? I really can’t say for sure.  It is possible that RVGD will not build a symmetrical triangle pattern and try another run at .03, but for now it is clear that a lot of energy has been ‘used up’ from this 6 day rally.

From the .0035 level when we first started talking about this penny stock to the .017 intra day high, that equates to a 385 percent increase.  Not a bad return at all, and once again proves the point of the amazing returns possible with penny stocks.  But of course I would be remiss if I did not also mention the possibilities for huge losses as well.

Timing is definitely priority one in the penny stock marketplace!

A quick update on RVGD.  I mentioned in my other post that in order for RVGD to be a good breakout candidate, it really needed to make a strong rally back up to .0035 into the close.  Well it did not quite do it in one day.  Instead it took two, and for now it does still look quite promising for a breakout.

It is possible we could see a gap up tomorrow and then news on Monday of next week.  If we do start to get a strong breakout, I think then we have to pay attention to the downside resistance, of which it has plenty.

I will do one more update on Revenge Designs, so it will be interesting to see how it turns out.  It seems like a high probability setup, not perfect, but not too bad either.

I currently see downside resistance at about .015

Revenge Designs is just one of a few sub penny plays that are hot right now.  CYOS also had a big spike on Thursday and looks promising for Friday.

For the most part the penny market still seems alive and well, even with the huge broad market correction we have seen in recent weeks.

I have to be honest and tell you that I really wonder how much longer the penny stock boom cycle will last.  Let us keep in mind that the broad market has been charging higher since 2003.  The penny market has been booming for quite some time as well. So if the broad market goes into a really severe bear market, it does bring up the question if the penny stock market will be crushed as well.  That is not to say there will not always be a few good opportunities in the penny market, there always are, but perhaps the frequency of them might dry up a bit if the broad market goes into a severe bear market.

Anyway, just something to keep in mind considering how long both the broad market and penny market has been to us!

Ok peace. That’s all for now. Keep an eye on RVGD.