Although the broad market is set to open just a tad bullish on Thursday, it's clear there's a struggle going on here just under new-high levels. The bulls are hesitant, and that can make stock-picking a dangerous game. Not all stocks are overextended, however. Take Cereplast, Inc. (PINK:CERP), Arca Biopharma Inc. (NASDAQ:ABIO), and Zynga Inc. (NASDAQ:ZNGA) for instance. Charts of all three of them say the bullish ball has just begun to roll.
If the name Arca Biopharma Inc. rings a bell, it may be because I took a bullish look at it back on January 30th. You may recall that was shortly after the surge that carried ABIO shares above the key 200-day moving average line, and given how beaten-down the stock was, even a modest bullish nudge in the right direction could means weeks and weeks of what would eventually be triple-digit rebound gains. I just didn't like it exactly then, because I knew it was overbought in the short run and would be pulling back before moving higher again.
Well, consider this your official notice that ABIO looks like it's done pulling back. Though I was hoping it would slide all the way back to the $0.41 level (the 20-day moving average line) before rebounding again, I have no complaints with the way it's all unfurled. Better still, it's pretty clear from the volume bars that the market is still very much net bullish on Arca Biopharma. The three selloff days were in weak (and shrinking) volume, and yesterday's bounce was on higher volume than the past two bearish days saw. I'm looking for more bulls to pour in today, convinced the uptrend has resumed with full force.
Speaking of stocks I've dissected of late, my bullish take on Zynga Inc. from February 1st was, shall we say, not agreed with by the majority? Simply put, I liked the way ZNGA had fought its way above several key moving average lines, overcoming a lot of sea-sickening volatility to get there. Plus, I liked the fact that the company was doing better, and that the stock was appropriately valued.
Yesterday's 7% pop - and the 8.5% gain since my look - should seal the deal, psychologically speaking. Though overbought like Arca was back on January 30th, and due for a near-term pullback (ZNGA is ready to open about 1% lower today), Zynga has put some distance between it and those key moving averages. the bulls aren't going to quite now, now that the momentum as well as the hype are flowing in their direction. Just wait for a small pullback.
Last but not least, my last look at Cereplast, Inc. from January 28th was a bullish one, and nothing's changed since then. Well, one thing's changed.... I'm even more bullish on CERP now after seeing the next leg of the rally over the past three days. Though a tad overheated in the very near term (and yes, due for a small dip), this chart has breezed past the 50-day line on huge volume that screams the bulls are piling in. After a modest pullback and subsequent uptick, this one will be buy-worthy again. And, that should be soon.
You may recall that CERP makes a plastic that doesn't require the use of any petroleum product or by-product (as most plastics do). It's also a biodegradable plastic, making it uber-green-friendly. The catalyst a week and a half ago was news that sales of the material had been getting some traction. In the meantime, Cereplast issued another press release letting investors know that not only was the revenue stream still strong, but it was accelerating. Though not yet profitable, the price/sales ratio of 2.56 for CERP is quite normal.