Should We, Or Should We Not, Trust MDVX, LVLT, and INSM?

For the second day in a row, stocks are running into new multi-year highs. Though little of the strength is justified, since when have investors been rationale? In any case, a handful of small caps pose a little less risk with their respective or potential trends. So, here's a better look at Modavox, Inc. (OTC:MDVX), Level 3 Communications, Inc. (NASDAQ:LVLT), and Insmed Incorporated (NASDAQ:INSM).

If the name Insmed Incorporated (NASDAQ:INSM) rings a bell, it may be because I've discussed this small cap before. I'm bringing it up again today for a couple of reasons, the biggest of which is to update you on the healthier scenario we've finally seen INSM create for itself. From this point forward, I feel much better about my bullishness.

My issue with INSM from a few weeks wasn't a lack of potential. It was (1) getting the stock above resistance at $1.09, and (2) finding an entry point into that uptrend that wasn't at a time when Insmed Incorporated was grossly overbought. Thanks to Monday's sharp dip and modest rebound since then, we're two for two on the trade entry front.

The chart below really says it all. Insmed Incorporated shares recovered with a bang in mid-February, but were too hot to handle. Since then, the stock's cooled off, and we're even seeing the beginning of a base being built at that $1.09 mark. With INSM well under last week's high, but with that huge lingering gap from last June, I can fully call this one a 'buy' now.



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Slowly but surely, Modavox, Inc. (OTC:MDVX) is chipping away at its resistance lines. The downtrend that's been in place since October - and guided by a handful of different resistance lines (blue) - may finally be at its end. That's not to say MDVX is in a full uptrend just yet, but as close as it is to being in one, it's not too soon to start talking about it.

If your first glance leads you to believe that MDVX is only hurdling the former resistance lines by the virtue of its mere sideways movement, you're not crazy - that's pretty much all that's going in here. Nevertheless, it's an important step towards any future upside. Besides, Modavox shares have been making higher lows since early February... so it's not as if the tepid bullish progress is strictly a technicality. That's the only rising blue line on the chart.

With all that being said, I feel the right/safest thing to do right now is wait. The 50-day moving average line (purple) is coming up fast for Modavox, Inc., and considering its importance to this chart as a pivot or breaking point over the last two years, we really should wait for MDVX to clear it before taking any bullish posture. That may not be a long wait though.

I know I'm supposed to fall in line here and fall in love with Level 3 Communications, Inc. (NASDAQ:LVLT) like everyone else clearly has over the last month. I can't though, as I've got one reality playing over and over in the back of my head like a skipping record.... we've seen this bullishness from LVLT before, but to no ultimate avail.

And when I say we've seen this before, I mean that quite literally. LVLT has tested the $1.62/$1.73 "zone" as resistance several times since late 2008, and each one of them failed to hurdle the ceiling. Moreover, if you go back further in time than I've displayed on my chart of this small cap stock, you'll see that zone has also played a support or resistance role for Level 3 Communications before. Translation? We can't afford to blow it off now, particularly when the stock's overbought (a condition that's been quickly corrected by pullback over the last year or so).

I think the ultimate outcome here is going to be a dip back to the rising support line, currently at $1.28. Eventually, Level 3 Communications, Inc. shares will indeed manage to cross and stay above the $1.70 area. They'll just need to start the move a lot higher than they have been. In doing it the way they have been, LVLT is already (too) overbought by the time the stock's in a position to make the leap.

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