Up and Out of the Market's Ashes...KGJI, PLAB, and CXM in Focus

Now that the market is at least making an effort to get back to normal, we can once again start looking at, and grading, small cap stocks and their trade-worthiness. Let's start with Photronics, Inc. (NASDAQ: PLAB), Kingold Jewelry Inc. (NASDAQ: KGJI), and Cardium Therapeutics Inc. (AMEX: CXM).

I know the last few days from Cardium Therapeutics Inc. have been pretty encouraging. This small cap stock has rebounded from a low of $0.20 to the current price of $0.24... a 20% pop. Before you plow into CXM though, you may want to take a step back and look at the bigger picture... we really haven't made any meaningful progress yet.

CXM, simply put, has a massive amount of resistance dead ahead, spanning from $0.24 to $0.26. It's a combination of tow resistance lines that extend all the way back late last year, and the 50-day moving average line. If Cardium Therapeutics can clear those hurdles - and that's a big if - then the bulls may have something to get excited about. Anything less though, and this rally is apt to be short-lived.

Though the phrase 'perfect storm' is a little abused within the stock-picking world (including by yours truly), Photronics, Inc. really is one of those small cap stocks that's seen its proverbial planets line up just the right way in the past few days. And, though PLAB has soared 25% today, after the initial dust settles, there's still room and reason for more upside.

In play here is a combination of earnings, outlook, heavy short interest, and a needlessly beaten-up stock. PLAB has been sold off from above $10.00 in May to nearly $5.00 two weeks ago, as the bears went after it.... hard. The short interest swelled to 13.6% (quite a bit for a small cap stock of this ilk). It's starting to backfire in the shadow of earnings though. Photronics posted a better-than-expected Q3, underscoring the plausibility of a forward-looking P/E of 8.8. Though back to $7.03 today, the buying volume is strong, and this chart has just now made its way back above the 20-day average.

Finally, a small cap that's surprisingly been able to survive most of the recent volatility, most likely because it had been beaten up so ably early in the year, it had nowhere else to go. It's Kingold Jewelry Inc. - a Chinese jewelry maker. If I'm reading the chart right, a breakout effort from KGJI could be in the works.

It's the weekly chart of KGJI that really tells the bullish story here. This stock has fought its way back above the 50-day moving average line while simultaneously working its way into a wedge shape. We've seen higher lows and a consistently bullish MACD indicator the whole time this rebuilding effort has been going on though, so the undercurrent for Kingold Jewelry is right. There's still work to be done though... the upper side of the wedge (currently near $1.88) needs to be broken to seal the deal. If that happens, then this will becomes one of my new favorite small cap stocks.