Date: 5/22/12
Price: Free
SmallCap Network provides comprehensive research and opinions on FTWR, SYMX, SGOC and CDTI.
Take Over Profits from Top Gainers (CDTI, SGOC, SYMX, FTWR)
Top Gainers Yield Profits after the "Hot Money" Leaves
Top gaining small cap stocks such as Clean Diesel Technologies (NASDAQ: CDTI), SGOCO Group (NASDAQ: SGOC), Synthesis Energy Systems (NASDAQ: SYMX) and FiberTower Corporation (NASDAQ: FTWR) offer profits for traders after the volatility dies down.
Many of these stocks will fall in share price after the "hot money" leaves. Research shows that stocks that rise from one time events will return to their average share price. This is a factor known as "mean reversion." It was dicussed in a previous article on www.smallcapnetwork.com. This is when the smart money moves in. These companies still have the same fundamentals, but are now trading at a lower price.
Clean Diesel Technologies is the top gainer today, up by more than half, due to Roth Capital Research initiating coverage with a "buy" recommendation. But the financials of Clean Diesel do not support such a price increase. Its return on equity, return on investment, earnings per share on a quarter by quarter basis are all in negative triple digits. The operating margin and profit margins are also negative, this time in double digits. Its relative strength index is near 70, which is the level for a stock being overbought.
This does not mean that buying Clean Diesel Technologies, SGOCO Group, Synthesis Energy or FiberTower Corporation is a bad investment: exactly the opposite. Savvy trades should wait for the "hot money" to leave and then pick up the shares at a much lower price. Today, as an example, Clean Diesel will trade at more than ten times average volume. The share price will fall when the buying activity falls and speculators take a quick profit. Patientence will then be rewarded for the savvy investor.
Many of these stocks will fall in share price after the "hot money" leaves. Research shows that stocks that rise from one time events will return to their average share price. This is a factor known as "mean reversion." It was dicussed in a previous article on www.smallcapnetwork.com. This is when the smart money moves in. These companies still have the same fundamentals, but are now trading at a lower price.
Clean Diesel Technologies is the top gainer today, up by more than half, due to Roth Capital Research initiating coverage with a "buy" recommendation. But the financials of Clean Diesel do not support such a price increase. Its return on equity, return on investment, earnings per share on a quarter by quarter basis are all in negative triple digits. The operating margin and profit margins are also negative, this time in double digits. Its relative strength index is near 70, which is the level for a stock being overbought.
This does not mean that buying Clean Diesel Technologies, SGOCO Group, Synthesis Energy or FiberTower Corporation is a bad investment: exactly the opposite. Savvy trades should wait for the "hot money" to leave and then pick up the shares at a much lower price. Today, as an example, Clean Diesel will trade at more than ten times average volume. The share price will fall when the buying activity falls and speculators take a quick profit. Patientence will then be rewarded for the savvy investor.
Jonathan Yates is a paid contributor of the SmallCap Network. Jonathan Yates's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.
