Small Cap Network Blog

If you’re one of those people who really thinks the global demand for oil actually dropped by 16% in less than a month, then I’ve got a bridge I’d like to sell to you. (By the same token, if you think the demand for oil quadrupled in the last four years, I’ve got another bridge….never mind.) Regardless of whether or not you think all the crude price volatility is justified or not, as I see it, right now isn’t exactly the best time to be making bets - oil’s still stuck in the mud, as it has been for a few days.

True chart-watchers call it a consolidation phase, where a chart’s price - whatever the security is - just moves sideways in a ‘range’. For crude oil futures, that recent range has been between $122 and $128. So, with today’s close of $122.08, it’s not like we have a whole lot to get excited about just yet. No, the next leg lower is only likely to begin once $122 cracks as support.

I don’t think it’s surprising that the consolidation is playing out at (1) a Fibonacci retracement level, and (2) around a long-term support line.

If the $122 area does end up breaking down as support, a move to $110 is not only possible, but I think likely. That’s where the next big Fib retracement line lies. It’s also an area proven to be a bullish bounce point before…in May. Still, it wouldn’t be a bad move, and it would definitely ease the pain at the pump.

By the way, I’m generally bearish on oil for a handful of reasons. One of them is simply that even though tropical storm Edouard is looming, it’s not enough to excite would-be buyers. Maybe they’re looking at the bigger picture…that OPEC has cranked up output for three straight months. Personally though, I’m not buying that argument.

The media is saying OPEC is ramping up output because a weakening global economy is hurting demand.

First of all, I don’t think demand has weakened that much. Even if it has though, think about the backwards-ness (nice word, huh?) of the theory. If demand is waning, you cut the supply to keep the price higher. Journalists are essentially saying OPEC is interested in a particular amount of cash flow, and will deal in volume (at low margins) in order to achieve it.

I’m no brain surgeon, but I don’t think the brains behind OPEC are dumb. I ‘m fairly certain they’re more than willing to not sell us any oil at a price they don’t like….they know we’ll have to buy it sometime. Their wallets should be plenty fat enough to tide them over until that day comes. In other words, I don’t think the ramp-up in production is permanent.
No, I think oil is going lower for one simple reason….just because it’s going lower. To assign some sort of rational reason for anybody’s decision to buy or sell? Well, frankly, I think it gives ‘em too much credit. The market isn’t that organized or reflective of the way things actually are.

Anyway, here’s the chart; you already know the key levels to watch.

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Say whatever you want about their fund-raising and stock issuance, but you can’t deny SpongeTech Delivery Systems (SPNG) is selling the living daylights out of their product. With our last look they had $30 million in orders; now the total’s been cranked up to $34.2 million (excluding any delivered/booked orders this past week).

The customer was the Dubai Export Company…a prior customer of the car wash sponge. This $4.2 million order is their third, and biggest, yet. Most of the order was for more auto wash sponges, but a few household cleaning sponges were requested as well.

The third order from this company, and each on is incrementally bigger? Hmmm. Ya’ think maybe that’s a sign of growing demand? I do.

Don’t hear me wrong. When I look at the whole capitalization thing and how RM Enterprises - also managed by SpongeTech’s management - happens to be the biggest shareholder, coupled with the deep discount they got on their shares, I have to scratch my head. I don’t like dilution and disparity. Who does?

On the other hand, I can not and will not deny this….SpongeTech is making good use of the funds they’ve raised. More specifically, they’re generating more revenue than they’re spending on the effort. Margins have always been good, and the ROI on marketing has been just as solid. So, I have little (ok, no) doubt we’ll see profits once again when we finally get last quarter’s numbers.

Dilution? Yeah, yeah….I’ll grumble with you. I’m also looking a the bigger picture though - the company is profitable. If my post-dilution shares are more profitable than my pre-dilution shares, they can dilute all they want. That’s the overarching point/question I hope we’re all keeping in mind.

In any case, I’ll remind all of us again that SpongeTech has sent a steady stream of this ‘new’ and ‘large’ order news over the last few months. They’ve got a back log (12 to 18 months) of $34 million, but three quarters ago did about $260K in sales. You’re in their ‘growth’ stage. All things weighed fairly, I still really like this opportunity.

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Score another one for Voyant International’s (VOYT) RocketStream - another customer has been added, further cementing the technology’s demand. Once again, it’s incremental revenue….I’m not sure how much, but any amount is going to be a significant amount for this new company.

The customer is OraMetrix, and the need is for a specific product called ‘SureSmile’. OraMetrix provides an orthodontic treatment process - dentists do the hand-work in their office, but OraMetrix remotely creates the solution using detailed CT scans of an individual patient. Of course, those data files can be huge. Hence, the need for a high-speed data transfer service like RocketStream.

Dentists previously sent a patient’s CT scans via snail mail, on CD-ROM. That’s anything but fast. Now they can transmit the CT data via the web, in a matter of seconds. OraMetrix can immediately begin creating archwires for individual patients.

The ‘impact’, as we said above, is more revenue; I’m guessing an up-front fee plus ongoing royalties of some sort. The bigger message is more credibility. Every new RocketStream customer makes it easier to sell it to a new another new customer….a snowball effect, if you will. And, there are thousands if not millions more potential customers out there.

Even bigger than that, I think quarterly earnings are due any day now for Voyant. I’ll be excited to see what kind of dollars they’ve already done with RocketStream. Remember, CEO Dana Waldman has already mentioned growth has been strong during the company’s initial launch. Stay tuned for those details.

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