Small Cap Network Blog

Tis the season…earnings season, that is. We’ve highlighted the earnings results of Execute Sports (OTCBB: EXCS), Biocurex (BOCX.PK), CEL-SCI (AMEX: CVM), and Network Installation (OTCBB: NWKI). However, there are a few more of our companies with recently-submitted results to review. They’re all listed below, with a quick summary, as well as a link to the full quarterly report.

Novelos Therapeutics (OTCBB: NVLT) reported a loss of 4 cents per share for their 2nd quarter of 2006, versus a 5 cent loss for the same quarter a year ago. For a six-month period - the first half of their fiscal year - a per-share loss of 8 cents is a penny better than the 9 cent loss for the equivalent period last year. For the full 10Q, click here.

Sense Holdings (OTCBB: SEHO) posted a loss of 1 cent per share for their most recently-completed quarter - the same loss they saw in Q2 of 2005. On a six-month basis, the 4 cent loss is 2 cents greater than the loss incurred for their first half of last year. For the full 10Q, click here.

Xtreme Companies (OTCBB: XTME) filed a 30 cent quarterly loss, compared to a 3 cent loss for the second quarter of last year. On a six-month basis, the company incurred a per-share loss of 85 cents, versus a 10 cent loss in the first half of 2005. For the full 10Q, click here.

In all cases, don’t assume the current numbers tell the whole story. Read the fine print, and read the news. Case in point - Network Installation. A year ago, the company had no earnings, but was incurring a lot of debt. The books didn’t indicate a major acquisition was being made, however, so the stock spent the better part of the last twelve months moving lower. Had you read the non-numerical information, you would have known about the acquisition…and you would have been paid well for it. NWKI shares are up 72% in the last two days, on earnings news. Very few people saw it coming. Needless to say, we’re glad we were watching it closely, and told you about the opportunity earlier this year.

The idea is particularly applicable to Xtreme, which posted dreadful numbers. The thing is, those figures also include some key accounting adjustments. You should also be aware the company has undergone a major overhaul in recent weeks, and is now operating under a strategic plan quite different than the one that yielded its six-month results.  

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In light of last week’s mixed market results, and today’s non-directional follow up, we’ve got a little time to review a chart we haven’t had a chance to discuss lately. We think you’re going to like what you see.

The last few weeks have been tough for Sense Holdings (OTCBB:SEHO). Shares peaked at 43 cents in mid-April, only to pull back to their current price of 23 cents. However, a closer look at the chart might be showing us a proverbial light at the end of the tunnel. The current price of 23 cents was first hit on May 25th…..15 trading days ago. Although they’ve yet to move higher again, they’ve obviously not moved lower either. In other words, shares may be establishing a base here, and gearing up for a recovery move. Were it just the recent bouncing between 22 and 25 cents, the range-bound chart may not have caught our eye. But we also saw support right at 22 cents back in early March as well as mid-January. So, clearly someone is interested in buying shares at current levels, as they have before.

Aside from the likely support level, we’re equally compelled by the growing bullish volume we’ve seen since SEHO worked its way back into this recent range. Once the stock gapped down to 23 cents on May 25th, we’ve seen three clear days of accumulation. Distribution (high volume selling), on the other hand, has been minimal, and far from rivaling the accumulation effort. It’s just a brief flash of bullishness that could indicate a bigger player is testing the waters. If that’s the case, the current bottom is a great entry point for SEHO shares, as it would occur before the buying volume really ramped up - to the levels we saw in March and April. If you’d rather wait for confirmation, any move above 25 cents would represent a bullish breakout of its recent range. 

As we mentioned, the 33 cent level for Sense Holdings represents a critical level. Here’s the chart:

Tuesday, the shares did almost a million shares, which continued a series of large volume days for the stock. The problem is that the volume didn’t advance the shares, which is annoying. The price is up against the 5/8 retracement of the large down move that ended at the beginning of this year, and while recent action has been constructive, large volumes with no volume isn’t.

We look for a new catalyst to blow the stock through that 33 cent level. The company tends to release news frequently, so grabbing a few shares in this range for the long term is likely ok. If it dips into the high 20-cent range, buy more. Just make sure you have at least a bit now in case I’m wrong–it happens– and a new upleg appears.

Trade Safely.

Relatively speaking… We chatted about Sense Holdings the other day–here’s the piece– with the shares at 24 cents. They cracked 33 cents today, and while that may not seem like much, it is an almost 40 percent rise in a few days. Here’s the chart:

I feel that the shares will attempt a test of that .618 retracement at 33 cents. Traders may want to take some profits as there could be a pullback allowing another decent entry point. Now it gets a bit complex: if the shares move lower from the 33-35 cent range, you might consider adding a bit more. If it just runs to 34 cents you’d likely want to take a chunk off the table. A core holding is certainly warranted for the long-term, but the action shows that traders can have a bit of fun while keeping some long for the long-term.

Volume is very constructive as the shares have strung three days of great volumes together to backstop the rise. The company also released news regarding some nifty biometric technology for Port Security and Cruise ships, late yesterday. With more news likely out there, this is definately one to own and trade. Finest kind of smallcap… Keep some, trade some, lower your cost base.

Trade Safely.

Sunday night, newsmagazine 60 Minutes did a story on the threat represented by the unchecked container traffic at US ports. Under 5 percent are ever checked for anything.

We have been on biometric and explosives/narcotics/biological detector maker Sense Holdings for a while now.

Sense is at the forefront of this critical Homeland Security technology and as the public gets more and more aboard/concerned with who runs the ports, the threats apparent, etc, it likely bodes well for the Company’s robust, low cost detectors. I know I’d feel better if there were a slew of these handheld devices deployed at all North American ports.

Could well be a decent time to pick up the stock. The green line represents the best buying spot with support around 25 cents, a buy at .245 would be ideal, technically.

The multiple red lines represent resistance levels at .33, .31, .28 and .27. We consider this pattern a confluence area. Trading smallcap stocks is all about risk reward. I like our chances around .24 to .25 cents to see if it can gather momentum and break above that confluence area. If it does, watch out. A big rally would likely occur. Conversely, if it breaks below our .24 cents we’ll have to reassess.

Trade Safely