Two Out of Three Ain't Bad: Looks at ACI, VRNM, and APT

Although the broad market's in the red today, a handful of smaller companies - though not all - are actually looking like pretty attractive long plays. Let's take a closer look at Verenium Corporation (NASDAQ:VRNM), Arch Coal, Inc. (NYSE:ACI), and Alpha Pro Tech, Ltd. (AMEX:APT).

February and early January were really starting to suggest there was a light at the end of the tunnel for Alpha Pro Tech, Ltd. (AMEX:APT). Too bad resistance stepped in and not only thwarted any bullish ideas the market had for this small cap, and actually rekindled the bigger downtrend APT has been in since October.

The 50-day moving average line (thick, purple) is the culprit. APT tested that level in mid-February, kissing it and than giving us a modest pullback..... almost imperceptible as a trouble spot. In fact, Alpha Pro Tech shares found support at its 61.8% Fibonacci retracement line immediately after that slight retreat. So, all looked well.

Today however - and all this week if you want to get technical - Alpha Pro Tech, Ltd. shares have been rebuked by the 50-day line in a much more decisive manner. Worse, the stock is now back under that 61.8% retracement line, and there's no other floor in sight until you reach the $0.75 mark where last year's big rally all began. It seems tough to believe, but with the increased selling volume over the last three days, I would NOT rule out a total retracement.



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I know the coal industry was blasted in 2008, and rightfully so in some respects. But, things change... despite some lingering chatter that coal stocks need to fall further before they rise again. The fact is, Arch Coal, Inc. (NYSE:ACI) as well as other coal stocks are rising again - the arguments that "they aren't worth it" are irrelevant at best (and plain wrong at worst) as long as the buyers are being rewarded with gains. And, if my read in the chart is right, the odds of more upside from ACU are much greater than the odds of any downside.

My chart of Arch Coal shares below is a bit messy. Sorry. My comments should help keep it straight though, beginning with the 200-day moving average line (thick, black). In early as well as late February, this stock found support there, pushing off of it on a big way.

The other aspect worth mentioning for the ACI chart is the bullish trading channel, the floor of which extends back to November of last year (thin, blue). That floor was raised in August, to the middle blue line.... the one that runs close to (and parallel with) the black 100-day moving average line. It too has helped hold Arch Coal, Inc. up after sharp pullback efforts.

My suspicion is that either or both of those support levels will continue to push Arch Coal back up after any pullbacks, particularly now that we're seeing higher highs. And yes, I think ACI has a decent shot at reaching that upper ceiling line around $31.00 before testing those floors again. Either way, the stock is a major buy at or near the support lines...and less so the higher up the trading range you find it.

And finally, though you can barely tell it, a major paradigm shift - for the better - is underway for small cap stock Verenium Corporation (NASDAQ:VRNM). The stock's been trending lower since late 2006, but as of this week we can finally say that VRNM is truly trending higher again.... after more than three years of disappointing results.

And what signals such a paradigm shift? In this case, it's a move above the 200-day moving average line (grey). VRNM had tested it - unsuccessfully - several times since 2007. Yesterday, however, Verenium Corporation shares moved and stayed above that line for the first time in years. The stock's even higher today.

Even without that crossover though, it's still clear that things have shifted to the bullish side of the fence for Verenium Corporation over the last several months. For the first time in years we saw higher lows on the chart (between March of last year and October of last year), which set up this week's slow crawl above the 200-day line for VRNM.

I know it's not fireworks. That's ok - the slower the recovery takes to get going, the longer it lasts. And, I've got a feeling that this slow, bowl-shaped reversal from Verenium is ultimately going to translate into one of those multi-year, multi-bagger holdings that really beats the crap out of the market, yet nobody really even knows about the company until well after the fact.

With all that being said, I can't say I'd buy VRNM exactly today. It's overbought in the short run, as this week's strength has taken it to the upper edge of a short-term trading range. Wait for a pullback, which ideally would pull the stock down no lower than its 200-day average. Here's a daily chart to show you that detail. The weekly chart is below.

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