INFI, ZN, ERII: Ahead of Fundamentals?
This has been nothing short of spectacular rally in the US markets for the last three months when the European worries started to subside. If the key benchmark index Dow Jones Industrial Average has gained 7.3 per cent in the aforesaid period, it is only logical to assume that the wider market may also have benefitted from the positivity among investors. What it also means is that many stocks with average fundamentals may also have appreciated beyond what is warranted. Infinity Pharmaceuticals Inc (NASDAQ: INFI), Zion Oil & Gas Inc (NASDAQ: ZN), and Energy Recovery Inc (NASDAQ: ERII) are some such stocks where investors will do well to exercise caution.
Infinity Pharmaceuticals Inc (NASDAQ: INFI), a Massachusetts based biotech player, has gone up 11.3 per cent in the last week alone after it added another 6 million common shares in its equity structure which were offered at a single-digit discount to the prevailing market price. Stock went up on higher volumes but it is not clear what the factors behind the surge were. It is a given that investors in biotech stocks are usually prepared for a healthy dose of speculation, caution still need to be excursed as the stock has moved into overbought zone. In addition, there is increased potential downside if wider markets tumble from here as the selling pressure will be more on stocks which have moved up sharply in relatively less time.
Oil and natural gas is another space where stock prices have lately been on a roll. It s thus no surprise that Zion Oil & Gas Inc (NASDAQ: ZN) moved up more than 10 per cent last week. The jump seems to be coming on the back of a sharp spurt in trading volumes. In the starting of the month, the company announced a successful reentry in operations at an oil project in Israel which provided a temporary boost to the stock. However, an RSI of 74 at current market prices is little difficult to digest and could be an early indication of a selling spree.
Green energy player Energy Recovery Inc (NASDAQ: ERII) also advanced nearly 11 per cent last week after announcing quarterly earnings which were liked by the street. After the latest jump, the stock has moved back to its Jan-Feb highs which is a positive indicator. Moving above key averages, this is the zone with minimum resistance but there are high chances of selling pressure coming back too.If not an outright sell, investors should trade in this with strict stop losses.
Do NOT buy or sell ZN, ERII or INFI until you have read everything.
SmallCap Network provides comprehensive research and opinions on ZN, ERII and INFI. |
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| Date: | May 24, 2013 | |
| Price: | Free | |
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