Purchased additional shares of Sunopta Inc. today at $12.55. I pulled the trigger prior to the conformation today, nonetheless STKL's stick sandwich formation was confirmed with the formation of a high volume long white candle stick and subsequent fresh 52-week high at $13.11. I am most certainly looking forward to Q1 earnings in early May.
Covered my short position at $25.85 today for a 10.92% gain. I don't really have any concrete rational for covering. The chart still looks terrible and JSDA is still totally overbought. I guess I will use to old tried and true cliche, "A gain isn't a gain until you close the position." Going forward I will short additional tests of $29, since resistance is firmly entrenched at that level.
Wednesday, April 25, 2007
Tuesday, April 24, 2007
Since its March 22nd high of $12.70, shares of Sunopta. Inc have been ominously quiet. Volume has dried up and the only press releases we have received contained minor fluff; completely devoid of any relevant economic developments. For some, this might be a cause for concern, but for seasoned STKL shareholders this is simply how the quiet Canadian company functions.
I originally profiled STKL after a March Forbes article, which highlighted several speculative alternative energy companies including STKL. Since then I have watched shares trade from a low of $11.80 to a high of $12.72 on meager volume. However, the past three trading days have once again caught my attention. First, volume(on the sell side) has become even more anemic at under 250,000 vs. the daily average of 600,000. Second, the last three consecutive trading days formed a bullish stick sandwich candlestick pattern.
Without getting carried away I will describe the sandwich and its significance in the STKL charting landscape.
The pattern forms with three consecutive candle sticks. First, a black stick forms indicating a continuation of a previous downtrend. Next, a white stick prints which trades higher or up to the previous days high. Finally, a third black stick forms which closes parallel with the first day's close.
The downtrend is effectively ended by the formation of the white candle stick. The stick opens, trades higher and closes higher than the previous down stick. This movement warns the bears that the downtrend is in fact nearing completion. The final day opens higher, trades lower, but is unable to break support formed during the previous two sessions. The bears take additional notice and begin covering positions adding to the buying pressure.
As with all technical trading, conformation is required to verify the formation. In this instance, conformation can come in the form of a gap higher, the formation of a long white candle stick or a higher close on the fourth day.
Significance for Sunopta
Observing the STKL 5 month daily depicts the importance of the current formation. Given that STKL is currently sitting at all time highs, it becomes crucial for STKL to build support prior to sequential moves higher. This helps the stock digest previous gains so that the uptrend is sustainable. It is also important to observe increasing volume during moves higher and not during periods of sell offs or consolidation.
One other interesting point is the incredibly high short ratio. As the graph above depicts the current short position is just over 6 million shares. This means that in the event of a rally, shorts trying to cover would need almost 14 days of average volume to successfully do so. Sunopta's first quarter earning release is on May 9th. This event might provide the needed rally to force the impending short squeeze.
Posted by CNL at 7:08 PM
Friday, April 20, 2007
JSDA is performing similar to yesterday. In the case of today, the stock gapped through resistance at the $27.00 level, attempted to rally through $29.00, and was met with resistance. Finally, after five 5-minute candle sticks JSDA violated the gap up demonstrating a failed rally.
This is important because it places additional longs in instantly losing positions adding to the overhead supply. I believe typical Friday's action will add to the selling pressure as day traders close losing positions heading into the weekend. For now I will remain short.
Posted by CNL at 7:03 AM
Thursday, April 19, 2007
With oil prices continuing higher and the majority of the earth’s elephant fields already discovered, the race is on to discover and exploit new energy sources. Industry analysts point to the tar sands of Canada and the fields of fertile America’s as likely alternatives to dwindling sources of traditional petroleum. In the short term, the combined efforts of these candidates and others such as biodiesel and liquid coal are only capable of slightly easing constraints on surging global demand. The reality is, we will need a unique combination of alternatives as well as new streams of traditional crude to sustain continued economic growth.
This is evidence in the International Energy Agency’s most recent monthly report, which points to data indicating an 80.5 million barrel crude inventory drop in February, which if verified would be the largest 2-quarter stock drop since 1999. The data also highlighted an astounding 12.3% increase in Chinese oil demand.
Undoubtedly, this means that “the majors” will continue to explore deeper into the Gulf of Mexico to exploit lucrative deposits.
What companies will benefit from this expansion? Aside from the drillers and producers; the service industry, in particular the providers of deep-sea construction and repair will reap profits as these operations continue to expand.
Below is an excerpt of Red Herring’s IPO analysis:
Superior Offshore International is a Lafayette, Louisiana-based provider of subsea construction and commercial diving services to the crude oil and natural gas exploration, production, gathering and transmission industries on the outer continental shelf of the Gulf of Mexico.
Superior Offshore International plans to price 8.67 million shares at $14 to $16 each to raise $310 million.
Formed in 1989, Superior Offshore International has about 550 employees.
For the year ending December 31, Superior reported revenues of $243.4 million vs. $82.8 million and net income of $48.5 million vs. $14 million for the same period a year ago.
The company intends to begin trading Friday under the ticker 'DEEP'
Even with an attractive balance sheet and impressive historical growth, the company faces inherent risks such as stringent competition from Halliburton and Nabors Industries, as well as its own inexperience within the deep water drilling industry. Risks included, the long term prospects of this company do poise an interesting play on the emerging deep water oil and natural gas industry.
Posted by CNL at 1:32 PM
Jones gapped below support in early trading and attempted to close the gap at $27.00, only to be met with substantial resistance. The next level of support is at today’s low of $25.00. If JSDA breaks this level then the stock will undoubtedly move lower weighted down by underwater longs and aggressive shorts.
Posted by CNL at 7:07 AM
Wednesday, April 18, 2007
Just minutes ago I was near completion of my original Jones Soda Co. post, but my computer burped at me and reloaded my screen before I had a chance to save! That being said I will make this second post short and sweet.
The intent of my original post was to explore rational for shorting Jones Soda Co. (JSDA). To call JSDA overbought might be considered by some as blasphemy since the company is now up 130% in less than 2 months and commands a P/E of 143 vs. the industry average of 24. That being said, I am not about to step in front of this rocket until there is an obvious change in market sentiment from bullish to bearish. I believe that alarm was issued yesterday after Think Equity Partners analyst James Maher downgraded the stock to "source of funds" from "buy" and raised his price target to $26 from $17. The stock responded by shedding more than 7% on strong volume. Then last night during Mad Money, the exalted Jim Cramer proclaimed, "Yeah, I would buy Jones Soda down here." This caused shares to gap higher in early trading only to be sold off and end the session in negative territory.
An analyst downgrade followed by a failed rally on heavy volume might be the events required to alter the underlining market sentiment behind JSDA’s trend.
The next level of support($26.21) is at the 10 day MA. If JSDA can hold that level, backed by volume the trend could very well continue. Until other wise noted I will remain short.
Posted by CNL at 6:51 PM
Tuesday, April 17, 2007
China Natural Gas, Inc (CHNG) is a company I have followed for some time. I have watched and owned this stock on and off over the last year. Most recently I sold my holdings as the company went into a three month PR hiatus. To me there are few things more frightening than an Over-The-Board Chinese company which fails to keep its share holders updated. The company’s silence coupled with the recent Bodisen Biotech inconsistencies convinced me to sell my holdings and run far away from this stealth Chinese based alternative energy company.
I however, have kept them on my radar primarily due to the company phenomenal growth history. Although, a micro cap CHNG has demonstrated impressive revenue and profit growth over the last two years. The company also has a commanding position in the emerging Chinese compressed natural gas (CNG) industry. Due to restrictions on emissions and the rising cost of petroleum, the Chinese government has encouraged the used of CNG as an alternative for transportation fuel. The city of
CHNG is engaging in the transmission and distribution of natural gas to industrial, wholesale, commercial and residential customers. The company currently owns and operates 23 retail CNG fueling stations, a 120 kilometer long CNG pipeline and provides 75,000 residential, commercial and industrial customers with natural gas.
Despite my original intentions to avoid this company I have remained observant for some catalysis which could propel shares out of their current slump.
After the markets closed today, the company filed its 10KSB Annual Report.
Financial Highlights for Fiscal Year 2006:
- Revenues increased 288% to $18.8 million;
- Gross profit grew 272% to $9.1 million;
- Income from operations increased 343% to $6.5 million.
- Net income increased 310% to $6.1 million or $0.23(ps).
As of December 31, 2006, the Company had $5.3 million cash
on hand compared to $675,000 at December 31, 2005.
Fiscal Year 2007 Update:
- Add up to 30,000 new pipline users by the end of 2007.
- Start construction of 15 CNG filling stations during '07.
- Plans to construct an liquid natural gas(LNG)plant in
Jinbiang, Shananxi province. With an estimated cost of
$40 million and an expected for completion by June 20008.
Posted by CNL at 6:40 PM
Monday, April 16, 2007
Sold my holdings in Diversa at $8.08, for a 11% gain. I would have liked to hold longer, but I grow weary when a rebounding stock like DVSA shows weakness or demonstrates a failed rally, as DVSA did today. Over the weekend the Associated Press printed an article about several bioteches’ ambitions to ease our reliance on corn as the primary feedstock for ethanol. The article mentioned DVSA as well as the improving economics of enzymes which; "Have fallen from about $5 a gallon to less than 20 cents a gallon. Analysts said once enzyme prices gets below a dime, cellulosic ethanol will become affordable."
Initially, Diversa responded well as the stock gapped up to a high of $8.60 in early trading, but slowly it drifted back to support in the low 8's. This could simply be an instance of a whipsaw, but I view it as a failed breakout.
Also Dyadic International Inc. (DIL), another enzyme manufacture featured in the article is somewhat holding its gains, which makes me more apprehensive of DVSA strength. Nevertheless, I am still keeping DVSA on my watch list.
Posted by CNL at 12:19 PM
Friday, April 13, 2007
Wednesday, April 11, 2007
Shares of Ciphergen Biosystems, Inc. (CIPH) have been hammered the previous two days after the company’s auditors issued a going concern qualification in the recent 10-K annual filing. As of today's closing shares are down 25%. Fundamentally, the company should be able to secure the required funding, due to continued R & D success of their Ovarian and Prostate biomarker technology and the backing of two well established multi-billion dollar companies.
- Ciphergen Biosystems and Quest Diagnostics Form Strategic Alliance
- Ciphergen Stockholders Approve
to Bio-Rad Laboratories Sale
That being said, I believe the near term will provide substantial volatility as CIPH moves towards oversold territory. Personally, I am looking for strong support in the $1.00-.90 range. If they can hold at those levels CIPH maybe an attractive buy as the market corrects the overreaction.
Posted by CNL at 6:54 PM
Saturday, April 7, 2007
The classic Cup and Handle is a formation I have traded for quite some time. I like it primarily because of its reliability and easily recognizable configuration within the charting landscape. The pattern also makes considerable sense with relation to buying and selling pressures.
A stock will form an initial high creating the left upper edge of the cup. From there, selling pressure escalates as the bears take control. Eventually, equilibrium is reached and subsequently a base is formed as the bulls and bears stalemate. Momentum starts to build as the bulls regain control and the stock moves to test the previous high, only to be met by resistance. Finally, the stock becomes range bound on light volume, effectively creating the handle.
One important fact-regardless of how picturesque the formation may appear, the pattern isn't complete until previous resistance is broken by a high volume move.
Extending Microvision's daily chart to the duration of one year reveals a Cup & Handle identified by two concentric highs in the low $4.00 range(resistance), a basing period through the second half of 2006(cup), and a classic low volume pull back(handle). As I stated before, conformation was still needed. On April 3rd and 4th, as MVIS neared the $4.00 resistance mark volume surged(x2 daily average) and powered shares to a new 52-week highs of $4.35 breaking previous resistance. Most importantly, on April 5th shares were able to close above resistance conforming the Cup & Handle formation.
Now with conformation we need to estimate the target price of Microvision's breakout. According to stockcharts.com the projected advance of a successful Cup & handle can be estimated by measuring the distance from the right peak to the bottom of the cup. Ergo, the deeper the cup the more significant the advance. For simplicities sake I will round my estimates to whole numbers.
4.10 - 1.40 = $2.70
(2.70 / 1.40) x 100 = 192% or 1.928
4.10 x 1.928 = $7.90
Posted by CNL at 2:13 PM
Tuesday, April 3, 2007
The next few trading sessions could mark a very important mile stone for Microvision Inc. (MVIS). Today, shares moved to a high of $4.13 on greater than 2x daily average volume. Unfortunately, the move was unable to break resistance previously set at $4.18. As the chart above depicts, MVIS formed a substantial Cup & Handle formation on the daily chart over the last year. However, for conformation the stock needed to break resistance at $4.08 and $4.18. A conformation is signified as a high volume move above resistance, a morning gap up or a successful close above this level.
As it stands now, MVIS is at a critical juncture within its technical landscape. If we can achieve conformation over the next several trading days the Cup & Handle will be complete and we could be looking at a breakout target of $6.30. However, if a breakout fails and we form a Triple Top there could be significant downside.
Given the strong volume today and subsequent test of resistance, I see the breakout occurring this week(Hopefully, in accordance with fundamental developments). Since I am currently long a significant holding in MVIS I refrained from adding additional shares at this point.
Posted by CNL at 6:49 PM
Monday, April 2, 2007
After the release of a March 21st Forbes article, shares of Sunopta Inc moved to a high of $12.70, breaking the previous historical high set in May during the biofuels craze of 2006. As the article highlights, biofuel companies received significant hype following the president’s 2006 State of the Union address. As with most instances of hype, companies’ shares swelled only to be deflated once revenues and contracts fail to materialize. To name a few, shares of Xethanol (XNL) and Earth Biofuels (EBOF.OB) have fallen more than 80% from their respective highs.
There are however real players within the emerging biofuels industry. Notably Archer Daniel Midland(ADM), the largest ethanol producer in the world and VeraSun(VSE), the second largest ethanol producer in the
Unlike current commercial scale facilities which uses simple sugars, cellulosic ethanol is produced from cellulose, a complex carbohydrate polymer found in plant walls. Since the bulk of plant matter is in fact cellulose the opportunity to greatly increase ethanol yields presents itself when compared to traditional corn based operations which only utilizes a portion of the plant. Biomass as a feedstock is also widely abundant and will not create a constraint by competing with the food industry.
Of the two current methods used to produce cellulosic ethanol — hydrolysis followed by fermentation of sugars, and synthesis gas fermentation (Fischer-Tropsch process), hydrolysis and fermentation with enzymes will likely emerge more viable if producers can continue to decrease costs. Novozymes and Genencor for example have reduced enzyme costs from $5.00 to about $.20 per gallon of ethanol through on going R&D funded largely by the Department of Energy.
After surveying the major cellulosic ethanol projects initiated over the past two years, I noticed one consistent player: Sunopta Inc. Sunopta's Bioprocess Group has been involved with every major development; including the US Department of Energy’s pilot facility in
From the company website:
"Our proprietary technology is the only continuous, industrially proven process in the world that can pretreat biomass at the temperatures and pressures required for subsequent enzymatic hydrolysis for the production of fermentable sugars."
As the cellulosic ethanol story develops, I believe Sunopta will continue to draw attention as they sign contracts and finalize Abengoa's commercial scale facility later this year. With shares trading near historic highs and a short position of 7 million shares(>17% of float), a contract with another major player or updates on existing contracts could be enough of a catalyst to propel shares much higher.
Posted by CNL at 8:23 AM