We received two reader questions about some of our recent small cap stocks. Since my mission for 2008 is to develop this site into a true small cap community, I’m going to ‘A’ as many ‘Q’s” as I can in the blog. Feel free to chime in with your own thoughts below (if they’re pertinent). Or, if you have something to say about a small cap besides one of these two, find that company’s most recent entry in the blog and say your piece there.

All your comments in the blog are read; most are posted (provided they aren’t spam, blatantly self-serving, or whining). I usually add my thoughts as well.

Anyway, here we are….

1) You wrote up a report on SWEB I believe and was wondering how you feel about that now with these big ups and downs. I have held onto it and actually have owned it for sometime. Also could you give any thoughts on ATML. 

Thanks for the question. StockGroup (SWEB) has one of the coolest investor-oriented sites I’ve ever seen (besides ours of course). However, the growth here has just been too slow. Anybody can buy a company and increase the top line; the point is to do more with a company than the previous owners did. StockGroup is a good company, but it’s just not growing fast enough. Less talk, more action…or more results. We’ve been following ir for a year, and the hype was huge in early 2007. Shattered dreams over the last 6 to 7 months have really let the wind out of the sails.

As for the future, I still think they’ll get bought (which is what they want). But, they have to get on the horse and get it going.

Regarding the stock’s ups and downs, a lot of it may have to do with the overall market’s mood. On the other hand, the market may also just be bored with the stale story. Keep it on you radar, though I don’t know that I’d be willing to hold it indefinitely right now.

No thoughts on ATML….I don’t know the company well enough.

2) Any specific reason for the price of SPNG to be dropping?

No, and that worries me. My fear is the short sellers have taken over SpongeTech (SPNG) again. If so, we’re back to square one. I won’t see the next short report until next week though, so patience is merited. Maybe I fear too much.

It doesn’t change the reality of the situation…this company is a steamroller, and God help anybody on the wrong side of the chart when the market finally sees it. Those short could get their heads handed to them at the drop of a hat.

The other possibility is a major holder is selling out, and just needed to wait for enough demand. I’ve not seen any insider selling reports, but it would explain the weakness.

Regardless, unlike SWEB, I’m more than willing to ride out almost anything for SPNG.

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I have a confession to make…as much as I’m in love with my newest favorite small cap company - SpongeTech Delivery Systems (SPNG) - the stock is driving me nuts. I thought we finally took off the handcuffs in mid-February when the short sellers got out of their positions, and the stock rallied from 1.5 to 4.9 cents. Since late February though, we’ve fallen back to 3.3 cents.

That’s not to say all hope is lost. Quite the opposite actually…the recent retreat was on lighter volume, and yesterday, the 50 day line stepped up to the plate and played a support role.

Also (though not shown on our chart), the low of 2.7 cents on Tuesday was just enough to clip the 61.8% Fibonacci retracement line, as measured from the February low of 1.5 cents and the high of 4.9 cents. Maybe the modest selling was just a flushout, ending with a brief capitulation on Tuesday. It was a nice late recovery either way.

Regardless of whatever technical analysis you apply here, one thing is undeniable - volume. There are more buyers than sellers now; anybody looking to short this stock again should be forewarned…you’re fighting the current.

That’s why I remain so confident about this trade.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.