Investing to Wealth

I know…..strange title for a blog, but today I feel like I am playing sandlot football. I am diagramming a pass play in the dirt and telling “timmy” to go long and “billy” to go short.  Well, in today’s blog I am telling my readers to look at two penny stocks that are a long and a short.

GO LONG - EDAP

EDAP is a French medical company that manufactures medical devices for the treatment (mainly) of urological treatments.  Here is their website, so you can do your own research.  EDAP Website.  Taking a quick scan of the company impressed me. They appear to have a strong stable of products that are accepted in the marketplace worldwide.  They have strong revenues (over $32MM in 2008), a strong balance sheet (strong cash, strong liquidity ratios, but $15MM in debt) and a likely looking chart.

And, at the end of the day, that is what I care about the most.  Here is the chart:

The chart indicates that August was a very good month for EDAP.  They got FDA approval for one of their medical devices and this small cap stock did just what it should with such good news:  it SKYROCKETED! A $1.50 small cap stock became a $4.50 stock in the matter of ONE day.  Since, I have watched it trade sideways.  In the first few weeks, it looked like the sellers were cashing out of the stock, but the odd thing was that the penny stock stayed stable and strong….i.e. no precipitous drops back to the lower level.  That speaks volumes to me.  The indicators above are showing a small cap stock that is oversold currently and with a MACD that is bearish.  The angle and strength of the bearish signal is weakening, but it is still bearish.  Volume has dropped off, but that is relative.  It still trades on average almost a million shares per day.

I don’t have a crystal ball to know if any more good news is coming.  Their second quarter earnings release was mostly good news and from PR’s they appear to be making steady progress towards increasing revenues and turning a profit.  I would recommend getting to know this company. I see good things ahead for them.  I wouldn’t be surprised if the stock doesn’t take that “next leg up” in the near future.

GO SHORT - NXTH

This is purely a chart play.  Take a look at the chart.

I’ve looked at the company and all I can see is hype.  A stock that has run up so far and so fast on what I would call “thin” news.,  i.e. Not a lot of meat, is due to fall.  Watch it for the tipping point which I suspect should come in the near future.  Financially, it is not a strong company, it has revenues, but is still very far away from being profitable.  Their PR’s are mainly puff pieces, IMO.

So, I hope that you score TWO touchdowns by going short and long on these two small cap stocks.

Good luck and good trading
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