The Bigger (& more important) Picture for WL, MRVC, and JOEZ : Stocks In Focus : Small Cap Stocks and Penny Stocks For Big Returns

With Wilmington Trust Corporation (NYSE:WL) in the hole 8% today to top off more than a 40% implosion over the last several weeks, odds are decent that more and more owners of this small cap are deciding to jump ship.... with today being the apex of the exit. May I offer a different viewpoint though? At this point, I think WL is a screaming contrarian buy, for two specific reasons.

First, thanks to today's awful open, we now have two bearish gaps to be closed (the previous one is from early June). Second - and more importantly - Wilmington Trust Corporation shares have once again found support at and already pushed off of the high $11 area (orange). Given how big of a deal it was late last year, I can't blow off today's intra-day bounce there. Plus, we're also seeing aligned support at the 61.8% Fibonacci retracement line. There's just too much fuel for a bounce here to keep betting against it.

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Nine times out of ten I can come up with an esoteric reason to like or dislike a stock. That one time out of ten, however, a chart's doing something obvious, trade-worthy, and uncomplicated. That's MRV Communications, Inc. (OTC:MRVC) .... I'm falling in love with this small cap because it's just going higher at a sustainable and reliable pace.

The weekly chart of MRVC below is crystal clear - it was in a downtrend, and now it's in an uptrend. We see a little ebb and flow, but by and large, MRV Communications is just plain gaining ... and shrugging off the market's curve balls. The only thing I'd do pro-actively here is to wait for a dip; the 50-day and 100-day moving averages seem to be rebound points (we're at the 50-day line right now).

And finally, I thought Joe's Jeans Inc. (NASDAQ:JOEZ) were going to recover from the early-May plunge to a low of $1.50. We saw a little up-and-down for a couple of weeks after that, but then we finally saw a move above the 50 and 100 day averages. Since then, however, we've seen a slide back under both. In fact, the 100-day line (blue) now appears to be acting as a resistance level for this small cap.

There is a last bastion of hope for Joe's Jeans shares..... the 200-day average (green), where the stock bounced in early May. Plus, the selling volume hasn't been all that heavy. With a little bearish momentum in place now though, JOEZ may not make a floor of it this time.

Bottom line? We're on hold here while Joe's Jeans wanders between support at $1.77 and resistance at $2.22. Any break under the 200-day average - which is likely - will be the beginning of round 2 of the selling. Be wary.

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To Mike.

Comment #2 Posted by James E. Brumley on Wednesday, June 23, 2010 12:41 PM PDT

Thanks for the comments Mike. I don't think they are pre-arranged sales, which should have been disclosed beforehand if they were, and at the very least should have been disclosed after the fact. I think it was a genuine case where somebody - large or lots of smalls - was buying and selling in a tepid market environment.

One one hand you can say it was bullish because the market absorbed the supply. On the other, you could say it was bearish because the supply was there in the first place. Given that the volume was worked through with little to no disruption though, I'll take it at face value and just chalk it up to a changing of hands while the rest of the market was distracted by other things..... it's neither good nor bad.

With that as the backdrop, we go back to the bigger picture uptrend, which is still easily in place. The short-term stuff last week was barely even a blip. and I doubt that buyer(s) heavy volume will come back to haunt us later.

That's my semi-educated guess anyway.

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MRV Communications

Comment #1 Posted by michael bailey moore on Wednesday, June 23, 2010 11:11 AM PDT

Mr. Brumley,

I have unfortunately been a long time owner of MRVC and I appreciate the positive coverage. What do you think about the two directors buying stock in the last week or so, one of whom, Gillman bought over a million shares. Volume was extremely heavy last Wednesday, Friday, and yesterday but the stock has not moved much. In yesterday's action, there were three trades of over a million shares, yet the price didn't move. Do you think those are prearranged sales between institutions or funds?

Thanks,

Mike

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The Bigger (& more important) Picture for WL, MRVC, and JOEZ

Small cap stocks Joe's Jeans, MRV Communications, and Wilmington Trust Corporation are put through the trading paces.

To Mike.

MRV Communications