Sep 3, 2010 9:02 AM PDT
Sometimes you find greatness from when and where you least expect it. Here are three small cap naems that are postioning themselves to serve up big returns, yet the majority of traders will never see it coming.
Palatin Technologies, Inc. (AMEX:PTN) isn't quite ready for primetime yet, but boy is it getting close. We've seen nothing but higher lows (orange) all month long, and the first higher high should be just around the corner, at that green horizontal line ($0.19). Less obvious is the slight uptick in buying volume for PTN. It will become more evident if the breakout takes hold though.
That said, the part that compels me to this small cap stock isn't the breakout itself, but the potential size of the move should it take hold. Palatin Technologies shouldn't hit resistance again until at least the $0.25 area... and that was actually a floor a few weeks ago. The next known ceiling is actually around $0.34.
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Looking for a nice bounce to swing trade? Take a look at Boyd Gaming Corporation (NYSE:BYD). It just pushed off not one but two meaningful support lines (blue, orange), and if history repeat itself - and I expect it to - we should see this small cap run somewhere between 3 and 5 points. The bounce off those support lines, however, isn't the core reason I'm looking for a pop here.
No, Boyd Gaming Corporation was rated as one of the market's 'most bearish' names today - the perfect contrarian 'buy' signal. I have little doubt the huge pullback from May and June prompted lots of short trades, and now those folks are either desperate and/or worried.....or some stragglers were late to that party and are just starting to short the stock well after the fact. Either way, BYD has far more going for it than against it.
I wasn't impressed last week when DayStar Technologies Inc. (NASDAQ:DSTI) ran all the way up to $3.15, as I knew the 200-day moving average line was there, and would probably be the perfect cap for the ridiculous surge. Sure enough, DSTI spent the next three days being reeled in. It's what happened since then that has me impressed... and bullish.
The bulls could have just thrown in the towel, but check out the action we've seen from this small cap stock over the last three days. DayStar Technologies shares are rebounding again, and volume has picked up. While I still see the 200-day moving average line (currently at $3.01) as the big hurdle, I absolutely think DSTI needs to go on your list of small cap stocks to watch. You can't tell this on our daily chart, but there's a stunning amount of room for this stock to recover; it should all start with that simple moving average crossover. 
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