Date: Thu Jul 14, 2005 11:03 am
I know that not a lot of folks are into shorting but might make interestingreading.
Okay let me start off with CKCM has good potential and is a bad long termshort. Short only short term. This stock has run from 9's to around 22.5 asof right now in less than 2 months. I can talk about it endlessly but forthose who are following it, 3 points I'd like to bring up.
1. They have 11 mil in cash only. CKCM by itself is a very profitable entitybut have rapidly acquired about 4 to 5 companies rapidly and might acquireone more soon. Earlier, my concern was price to sales was very high althoughprice to earnings was in control. The acquisitions will help their price /sales which is good for the company. BUT - consolidation will definitelyaffect their profitability. Besides, what does any growing company do -increase hiring, marketing expenses. End result: lower profitability insight.
2. Low cash and so to facilitate any acquisitions, price of stock (gone upreally high recently) can be used for a secondary, as outstanding shares arequite low. This could be the reason they are keeping up the price assecondary investors want an average stock price over 3 months or so, kind ofdeal. Remember how secondary offering guys got burnt with mamma.com forfinancing 15 mil at 11 bucks when stock now is at 3 bucks. Why cause theywent in with current price rather that long term price. Ouch! Any secondarywill bring down stock due to dilution.
3. Been following the moving averages closely and though I don't believe inany one of them making a difference but more so the overall effect thatmakes a difference.
About 10 days back 10, 20, 50 and 100 day moving averages had their slopesup. About 5 or 6 days 10 day slope became negative. Then there was the rallyin Nasdaq and stock went up some 9% over 2 days. Next, serious distributionat resistance 24 +/- 0.7 and stock is again back down.Today, the 10 day slope is positive but the 21 day slope is negative. 10 dayslope is at 22.45. If stock closes below 22.45 that will make 10 and 20 dayslope negative. That in my opinion is a steady indicator of a stock goingdown.
Ofcourse need I say this is one of the most manipulated stocks you can see.Today it opened at 24, a buck higher than it's yesterday close. Tactic: Openstock very high on a day where stocks are supposed to go high due to theearnings hype, ON VERY LOW VOLUME. When it opens at 24, you've triggered alot of stops and then you short it on high volume. Stock visited 21.97 afteropening at 24.
Alright, if you short this, remember: Buy to cover stop at 24.8. All hellmight break loose if that happens cause stock has above average supportbetween 21 and 24. If it falls below 20.80 and with a little help from theNasdaq, stock will have next support level at 19.5, 18, 16.
Good luck All!
