Uh-Oh... CRM, BNX, and NTWK Close to the Tipping Point

Could it be the market has finally figured out that when they're buying salesforce.com, inc. (NYSE:CRM), they're buying a stock that's 272 more costly than its trailing earnings? The counter-argument is that you own a stock for where it's going rather than where it's been. Fair enough. Problem is, this stock is still priced at 70 times its forward-looking earnings... a valuation that's tough to justify no matter how you slice it.

Anyway, the weekly chart of CRM really puts the recent pullback into perspective. We've seen a string of lower highs since late last year, and the 200-day moving average line (green) is under attack for the second time in the last three months. The bears don't seem to be letting up though. If that 200-day line - currently at $125.86 - fails to hold up as support, the selling could ramp up in a hurry soon after. Keep it close if you're currently long salesforce.com.

For NetSol Technologies Inc. (NASDAQ:NTWK), things just went from bad to worse. Already in a downtrend being guided by resistance at several falling moving averages, the bears re-struck a major blow today by pushing this one back under the all-important 200-day moving average line (green). Now that the damage is done, the sellers may decide to really come out of the woodwork.

Truth be told, NTWK probably doesn't deserve to be hammered. It's got a trailing P/E of 11.6, and a forward-looking one of 8.1. And, its history suggests it's better poised to beat estimates than fall short of them. Doesn't matter though - the market has lost faith (and interest), and it's making NetSol Technologies one of several small cap stocks becoming a victim. No point in trying to catch a falling knife.

Last but not least, to its credit, Banks.com Inc. (AMEX:BNX) has managed to fight its way back above the key $0.159 level - it's currently at $0.167. Why is the $0.159 mark so important? Because that was the low (and ultimately the rebound point) back on December; it should be no real surprise to see the bulls staging another recovery effort around there now. The question is, where will it close? A close under $0.159 would confirm the entry into mew multi-year low territory.... a stigma not easily shrugged off.

And what drove BNX to the brink? The latest batch of hysteria was earnings based. Frankly though, this small cap stock probably doesn't deserve the beating. It generated $1.9 million in revenue, which on an annualized basis becomes about $7.6 million. That's not bad for a $4.2 million company. No, there are no (net) profits, but the break-even it generated last quarter is pretty impressive considering this is a tiny start-up.

The problem most investors may be having with Banks.com - and this is understandable - is that it's a moving target, with different ventures and divisions seemingly forever being bought and sold; to 'annualize' last quarter's revenue is almost a joke. Still, with just a little stability and a change in the current mood of investors, there's actually a decent value-oriented argument somewhere in here.