This is why you get into a stock even when it doesn’t ‘feel’ perfect. Shares of small cap company Bio-Matrix Scientific Group (BMSN) are racing, up 33% today, and hitting new highs of 80 cents. Why? I was hoping it would be a pre-curser to a successful inspection from the California Health Department. I had forgotten they’re paying their preferred stock dividend tomorrow…as long as shareholder’s common shares were properly registered.

To receive the dividend, most owners just decided to push their shares out of margin accounts and into cash accounts. The result was that many - if not most - short positions have been ‘buying to cover’, as shares held in cash accounts can’t be loaned out to short. It’s akin to a margin call. The long-owners are the beneficiaries, and I doubt any short traders are interested in trying their hand again. That’s exactly what we wanted to see.

The upside is also technical; now that BMSN has broken out of a range and is at new monthly highs, other investors are likely to get interested.

The icing on the cake is that we still have the potential news about their licensing inspection. If that goes well, we’ll look for yet another pop in the stock.

The lesson to be learned? Sometimes you just have to get in the batter’s box and take a swing when the story is right. The other lesson to be learned….more often than not your friends at the Small Cap Network steer you in the right direction. BMSN is up 41% from where we picked it, and more inspiring news may be on the way.

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