Time to Unjoin the Crowd: Realities for WAMUQ, SSN, and ALKS

Small caps Samson Oil & Gas Limited, Alkermes, and Washington Mutual Inc. are rated and reviewed.

Mar 9, 2010 12:48:01 PM PST | 1996 View(s) | 3 Comment(s) - Post a Comment Rating

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Though stocks are (or were) in the black today, cautuion is advised from some of the market's most bullish small caps. In fact, Alkermes, Inc. (NASDAQ:ALKS), Samson Oil & Gas Limited (ADR) (AMEX:SSN), and Washington Mutual, Inc. (OTC:WAMUQ) all look particularly troubling right now. Here's why.

Well, it looks like my two-month saga with Washington Mutual, Inc. (OTC:WAMUQ) is finally going to come to a close today. That's not to say I won't start another one at some point down the road, but now - after my original January 4th bullish call - I'm going to go ahead and suggest a final exit on WAMUQ. No 'wait for a dip', and no 'take some profits at a peak'. I'm done with the stock until further notice, and suggest shedding all of it if you own it.

What gives? I think WAMUQ has rallied about as far as it can, and I'm not the only one that thinks so. See today's wildly-tall range and trend-reversal? This is a very strong sign that profit-takers are now finally starting to file out of Washington Mutual, Inc. en masse. Generally speaking, this kind of volatility is an early warning of much more selling pressure down the near-term road. And, considering the ridiculous size of the move, I can't say I blame anybody for locking it in.

All told, I suggested Washington Mutual shares back in early January when this now-a-small-cap stock was trading at $0.17. Scaling out at the current price of $0.51 translates into a gain of about 200%.... not bad for two months of work. Now though, it's time to collect a paycheck; please don't give all your WAMUQ gain back to the broad market (which doesn't deserve it). I'll revisit the chart if/when the stock finds a floor around $0.20.

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I know I'm supposed to be a bull on Samson Oil & Gas Limited (ADR) (AMEX:SSN) now, particularly after today's 18% rally. I'd be doing you no good, however, if I wasn't a voice of reason without the bias of euphoria and hope. SSN is overbought right now, and even if it manages to keep rallying, a major ceiling is dead ahead.

None of this is to imply that SSN is toast. In fact, we're seeing huge degrees of buying volume now, which we've not seen in year for the stock. Things may truly be "different this time". However, different or not, Samson Oil & Gas shares are just going to have a hard time tacking on more gains from here.... after more than a 100% gain (not to mention a left-behind gap) in less than a month.

In the bigger picture, whether or not Samson Oil & Gas Limited dips first to cool off its overbought pressure, or manages to proceed straight on, there's a major resistance line at $0.70. SSN has traded above there on a few occasions since last January. By and large though, it's been the upper side of a pretty constricting range. We can't assume this small cap stock will hurdle it at this point.

And finally, Alkermes, Inc. (NASDAQ:ALKS) is all the rage today, but I have doubts about the stock being anywhere near as bullish tomorrow. Quite the opposite actually. I suspect ALKS is going to use today as a pivot from the prior uptrend to a new downtrend.

Why's that? A couple of reasons, both of which have to do with the shape of the chart and the shape of today's bar. First and foremost though, we're seeing a doji bar from ALKS today. That's just a fairly tall bar (intra-day trading range) with an open and a close (so far) right in the middle of it. It's an indication of indecision, and unfortunately for Alkermes, Inc., also frequently precedes reversals.

The other reason I'm turning bearish on Alkermes is also chart-based, and semi-related to the doji. Clearly this small cap stock's chart was rallying leading up to the doji today. But, take a look at yesterday's bar ... it's a 'long white candle', meanings it's tall, and came after a prolonged runup. When this pattern precedes a doji that's gapped up - like we saw with ALKS today - the doji is also called a 'star', and its reversal clue is even stronger.

I'm not a giant fan of candlestick analysis, but I see the value. And, in the case above with Alkermes, it's a little too 'textbook' to ignore. Here's some more on the matter.

If you'd like to receive further updates and any changes in our opinions of WAMUQ, SSN, and ALKS, be sure to sign-up for the SCN Newsletter today! It's FREE.

James E. Brumley is a paid contributor of the SmallCap Network. James E. Brumley's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.

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Like I said.....

James E. Brumley

Mar 12, 2010 11:32 PM PST

.... the charts tell me more about a stock's future movement than any impending news ever could. Hopefully this will encourage everyone to start adding chart analysis to their fundamental speculation.

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To Jack

James E. Brumley

Mar 9, 2010 9:05 PM PST

Hi Jack.

No - I'm following the story too. I'm just using the chart to tell me how the market is processing the knowledge of the future outcome.

The adage "buy the rumor, sell the news" is good advice, even if cliche. The market has already priced in the potential news, meaning there's no room for any price appreciation once the settlement is finalized.

Am I certain about WAMUQ being all spent? No, but the odds say the risk/reward scenario favors getting out now versus waiting for the actual news.

Maybe I'm wrong, but I can live with being wrong, getting out too early, and still enjoying my 200% gain. I can't live with sticking with a stock too long, and giving that gain back just because I thought I still may have upside left. Just a preference.

If your confidence is high in WAMUQ's future after the announcement, then by all means you should stick with it.

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Your call for a final exit on WAMUQ

jack Goldman

Mar 9, 2010 2:02 PM PST

Why in the world would you call for a fnall exit for WAMUQ just three days before either a "global Settlement" is reached between JP Morgan, FDIC and WMI or the court makes a Summary Judgement for the return of WMI's 4 billion in deposit from JP Morgan? I guess the answer is that you arent following the case in the court, but using the chart to make your calls.

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