Sep 10, 2010 8:47 AM PDT
If any of you are intimidated by the 14% pop from small cap stock Star Scientific, Inc. (NASDAQ:CIGX), I can't say I don't understand; I also hate to feel like I'm chasing performance, and I really hate feeling like I'm stepping in right at a short-term top. In this case though, I think the bullish clue today is the real deal.
Star Scientific shares had been making higher lows; the problem was a lack of higher high - until today. The resistance line at $1.98 was broken today, with a vengeance. Factoring in the volume bump, you have to like your odds.
But too far, too fast? Normally I'd think so too, but look back at what CIGX did in March - it kept going, and going, and going. There's no reason not to think it can't happen again. 
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Well, it's a good news/bad news situation for Newport Digital Technologies, Inc. (OTC:NPDT).... a small cap name I went mostly-bullish on a few days ago based on a nice cross above the 50-day moving average line. While I still think there's a ton of upside potential in store here, the bulls have hit a wall.
The good news for NPDT is that the bulls came back fighting after a slight pullback from $0.014 to $0.010 last week. The bad news is, Newport Digital Technologies has now stopped its advance right at $0.14 for the second time in a row. That line is marked in blue, and it's clear how decisive that ceiling is. The tapered buying volume with this second push makes things that much more alarming.
While I still recommend you keep NPDT on your radar, I can't suggest buying into this small cap stock right now. In fact, I'd take profits (if you have them) and wait for a little more clarity and/or a move above $0.14. 
Not that it doesn't have its merits, but let's be honest here - the SPDR Gold Trust (ETF) (NYSE:GLD) crossed the 'intelligent diversification' and 'worth it' lines several points ago, and has been moving higher since then only on the "I have to jump on the bandwagon too" mentality. Funny thing about that latter reason though... it wanes easily and quickly. I've got a feeling the dip over the last five weeks from GLD is just the beginning of a major correction (largely thanks to the fact that inflation has yet to materialize... and may not for months).
The key to and demise in GLD should be a tumble under the rising support line (blue) that's been in place since mid-2009. It's at $114.60 right now, versus the current SPDR Gold Trust price of $115.62. That said, I think we can add a layer of certainty to such a downside trade by waiting for the 200-day moving average line (green) to be broken; it's at $112.58.
Either way though, I think the post-euphoria pullback - once investors realize the sky isn't falling - is on the way. In fact, given the lack of buying volume as the last new high was hit, and the uptick in selling volume behind that first big reversal from five weeks ago, I think the big pullback is already underway.
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