The bullish drum is still pounding, and even more so now for some small caps. Take China BAK Battery Inc. (NASDAQ:CBAK), Dialogic Inc. (NASDAQ:DLGC), and Vega Biofuels Inc. (PINK:VGPR) for instance. These three names perked up late last week, and are dropping hints of budding breakout efforts. Here's what to look for, and what's driving the new bullish interest.
With sales of electric vehicles have fallen well short of what their manufacturers had hoped for, sales of their lithium-ion batteries used to power them have also been tepid. However, many investors may not fully appreciate that China BAK Battery Inc. doesn't just make li-ion batteries for EVs. In fact, the bulk of its business is the manufacture of batteries for smartphones and tablets... a business that has been very good, and getting better. Though still not back to 2008's levels, CBAK has pumped up the top line for the last two years, and really put up big numbers last quarter (a big year-over-year improvement). It's still not profitable, but it's getting very, very close. That's largely the reason for Friday's big rally from the stock, which pushed China BAK Battery shares above the 200-day moving average line on strong volume.
That said, the recent runup (from last week) may have been a little too good for its own good... any 42% rally is a tough act to follow. As such, CBAK may be due for a brief technical dip. Don't freak out though, as the dip may be a buying opportunity within an even bigger, bullish paradigm shift. As this weekly chart of China BAK Battery Inc. shows, the chart's been working on a recovery effort for several weeks now, and has established a nice foundation from which it can push off of of.
Prior to March 10th, odds are good that Vega Biofuels Inc. was unknown to practically all traders. As of March 10th though - when volume started to explode and the stock started to climb - it became pretty clear VGPR is now turning heads. We've also seen strong volume materialize out of nowhere.
What happened with this biofuel name to light this fire? On the surface the chart of VGPR looks like it's been promoted. And, that may well be the case (though we could find no evidence of a paid tout - chime in below if you know otherwise). Rather, VGPR may legitimately be going higher because the company's finally starting to promote meaningful amounts of its product, and on the verge of meaningful mass production. In simplest terms, Vega Biofuels Inc. makes biomass coal out of organic waste by-products. It's gotten funding, it's now out there promoting its coal, and it recently acquired a place to mass-manufacture the stuff (all within the last month). With a market cap of only $1.5 million, even the tiniest amount of revenue could get real traction. It's worth watching.
Finally, Dialogic Inc. was dead in the water - since the beginning of the year - until Friday when it popped 88% following last quarter's numbers and an outlook for 2012. In simplest terms, they were good. DLGC posted its best EBITDA ever, and sales were up 5.5% for the mobile device software producer. All told, the company generated a record $198 million in revenue last year, and though it's nowhere near producing a profit, the business model has been proven to be viable; now it just has to enhance the numbers. That's a big and long job, but it's not out of the question.
In the meantime, DLGC shares are going to be dealing with the echoes of a huge surge on Friday. Normally such a rally would leave no room for more gains, though in this case the pre-market action says the buyers are still at it. Still, newcomers may want to let the dust of the initial surge from Dialogic Inc. settle first before stepping in. With a price/sales ratio of about 0.25 though, a good value argument is in place.