Time to Head for the Exit: BMSN, ZHNE, and HLF Under the Microscope
Just to quell the grumbling before it even starts, none of what I'm about to say regarding Herbalife Ltd. (NYSE:HLF), Bio Matrix Scientific Group Inc. (PINK:BMSN), or Zhone Technologies Inc. (NASDAQ:ZHNE) is a judgment call on the merits of any of these companies. This is a trading-based update on comments I've made about all three in the past. It's entirely possible my ideas may not apply to your situation. In that note, I believe now's the time to shed ZHNE, HLF, and BMSN. Here's why. 
It was only Monday of this week I suggested Bio Matrix Scientific Group Inc. was a buy, though I also had to give credit where it's due - James Brumley was the first one to point out the budding bullishness. He picked it when BMSN was trading at $0.0038 back in late January, and I didn't pick up on it until the 11th, when it was trading at $0.0071. Either way, I think now's the time to take the money and run.
As of today, BMSN is trading at $0.013, up 83% from my first mention, and 242% higher than where it was with James' first look. While the overall momentum still seems strong, the size of those gains is pushing out luck here, but more than that, Bio Matrix Scientific Group is waving a major red flag today - the bullish gap at the open and subsequent (and immediate) pullback to the low of the day implies the majority of the crowd is starting to get out; you don't want to wait until they've all actually done so. Also note that the buying volume on the way up started to fade as the week wore on. 
I looked at Zhone Technologies Inc. back on January 23rd. It was impressive to see how ZHNE had temporarily pushed above its key 200-day moving average line that day, but I was concerned about the fact that it hadn't been able to stay above it. Still, the fact that the bullish volume was growing and that the bulls had outed themselves with the burst of buying boded well for the stock. So, I said any close above the 200-day line (at $0.65) was the key.
It finally happened on Monday of this week, in spades. ZHNE closed at $0.79 that day, and has since moved to the current price of $1.07. That's a 35% gain from an entry late Monday, which isn't much, but it's a lot considering Zhone Technologies has rallied 64% this week. I do think after a pullback this stock will rebound and renew the bigger uptrend, but for anyone who isn't a true buy-and-holder, let's pocket what we can, while we can.
Finally, when I went bullish on Herbalife Ltd. back on December 24th, I caught some flack for it. And by 'flack', I mean I got called some names that would make a sailor blush. It was when the buzz of Bill Ackman's critique of the company was it's loudest, and clearly - because all the media said so and every investors agreed - HLF could never go anywhere but down from there.
Yeah, well, as it turns out, December 24th was THE bottom for HLF. The stock has since rallied from a close of $26.06 then to the current price of $43.37. That's a 66% rebound.
I don't bring up Herbalife Ltd. to gloat though (well, not to gloat much). I bring it up now because the sentiment-based reversal trade has come full circle. In the same sense that HLF was hitting its worst-case scenario value back in late December, it's hitting its best-case scenario value now (bearing in mind best and worst are relative ideas). If you got in on my call, let's lock in that 66% gain and just start a worry-free long weekend.
Bryan Murphy is a paid contributor of the SmallCap Network. Bryan Murphy's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.
Do NOT buy or sell HLF, ZHNE or BMSN until you have read everything.
SmallCap Network provides comprehensive research and opinions on HLF, ZHNE and BMSN. |
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| Date: | May 23, 2013 | |
| Price: | Free | |
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