TRADE OF THE DAY *** James Boric reports to you from Bloomington, Ind.... Small-cap investors are facing a turning point in the market. The tragic bombing in London, explosive oil prices and a shift in sentiment have created a huge opportunity in the small-cap market. Right after its annual reconstitution, the Russell 2000 small-cap index hit an all-time high yesterday. In terms of raw speed, this small-cap bull market came out of nowhere -- fast. We don't think it's a fluke. We don't think it's luck. And we don't think it's going away anytime soon. ________________________________________________________________ This Breakthrough Genetic Treatment Could Bring 5,000% Profits or More! A group of Scandinavian scientists is using the world's largest "genetic map" to pinpoint cures for mankind's deadliest ailments. Obesity, heart disease and stroke could be wiped off the planet with absolutely no side effects. This company's pioneering treatment may well become the industry standard. The U.S. government, major financial institutions and Big Pharma are lining up to partner with or invest in this technology. Find out how you can, too.. http://www.agora-inc.com/reports/VPI/WVPIF706 ________________________________________________________________ Let's take a look.. *** Even we have to admit that the Russell 2000 is pulling a Rasputin: It simply The similarities between 2004 and 2005 are striking... In 2004, the RUT (as we call it) was dead flat on July 12, year to date. And we all know what happened in the second half of the year. It jumped 100 points before December was done and gone and outpaced the blue chips for a sixth straight year. So can you expect another big rise this year? Your Penny Sleuth, always skeptical, sent an e-mail around the office last week wondering if now was the time to pull a contrarian move and buy puts betting the index would decline. After all, we did think that the reconstitution wouldn't work, because it weighed down the index with tech bummers. Carl "The GRIPPER" Waynberg and MST technical analysis guru Mark Bail chimed in. Here's what they had to say... Carl "The GRIPPER" Waynberg: "The current chart is definitively bullish. With a golden cross of the 50-day through the 200-day imminent, bullish RSI and stochastics, and small caps in an unbroken uptrend versus big caps (surviving two recent tests), a put would be a bet against the evidence." OK, now in English... After looking at a million and one technical indicators, Carl weighs in with a resounding "No!" He sees the small-cap index moving higher. And his advice is not to bet against the major trend -- which is solidly pointing north. To reach his bullish conclusion, he looked at the relative strength index (a comparison between the days that a stock finishes up against the days it finishes down to gauge momentum), stochastics (the percentage of the difference between the low and high price during a defined period) and moving averages (average prices over a given period to show trending). So what does Mark have to say about this matter? Mark Bail: "Carl's point is well taken regarding the Russell 2000's recent Translation: Mark agrees with The GRIPPER 100%. And guess what? So what company should you be buying right now? First, let's start with what you should avoid... *** Barron's did a two-page write-up on the homeland security sector in response to the horrific London bombings last week. As you can imagine, there was a lot of binge buying taking place. IPIX (which makes closed-circuit surveillance systems) and Isonics (which is working on a device that can scan anything from suitcases to steel casings) rose 25% and 23%, respectively, last Thursday. But you would be a fool to chase them now. Hell, you would have been a fool to buy last week! IPIX's closed-circuit systems are nothing more than electronic commodities that can be made by a lot of different companies. And Isonics' portable scanning devices are still in the R&D process. They have not been tested in the real marketplace. Oh, and then there's this minor detail... IPIX hasn't made a dime in real profits in six quarters! And ISON hasn't made a dime in over 12 quarters! Ahhh...minor details. Who needs a proven product? Who needs profits? Of course, I say this with more than a hint of sarcasm in my breath. Your Penny Sleuth is constantly amazed at what dumb people buy. But like any fool, they will get what's coming to them -- soon, I think. Both stocks have come down since last week. Shares of IPIX are off almost 8% from their highs. And Isonics is down 15% from its highs. We'll see how this plays out...but I wouldn't touch them for my life. OK, enough of this bearish talk. We are in a bull run, for goodness' sake! And there are some small-cap companies in the defense sector to pay attention to -- especially now. *** If you are looking for a few speculative, defense-oriented small caps to own, "The biggest ultimate winners in terms of new business, which include some relative laggards last week, will almost certainly be companies involved in identification security. Last week's events will almost certainly accelerate the launch of a national ID card in Britain, and similar plans are advanced in Saudi Arabia, Spain, Portugal and some other European countries." If they are right, these are the companies to keep an eye on... Viisage, Identix, LaserCard and I.D. Systems are all in the business of face-recognition technology, biometrics or identification. If, indeed, more and more countries do adopt a mandatory identification card, these will be the companies most likely to gain million-dollar contracts. Twenty million people will cringe in the darkness, poking around for damp matches and greasy candles. On Oct. 26, 2004, a 578-page report revealed that China's rabid growth could grind to a screeching halt without this one ignored element. Virtually no investors know about the $30 trillion that must be invested in the "secret juice" that invigorates China's rampant growth (hint: New York and California can't live without it either...). Grab some of the hidden juice right now, and my best estimate is that you could easily double your returns. In all probability, you're looking at as much as eight or nine times your money. http://www.agora-inc.com/reports/OST/WOSTF707 And this brings us to the TRADE OF THE DAY... *** Viisage (VISG:NASDAQ), received a $1.9 million contract from the Connecticut DMV last week to prevent identity theft and fraud. Since that deal, shares of VISG have risen 4.6%. And with the heightened awareness for more security in light of the London bombings, there should be more contracts moving Viisage's way. Unlike IPIX and Isonics, Viisage has an established set of products being used all over the world. Its customers include the Department of Homeland Security; the State Department; the Department of Defense; and the national police in the Czech Republic, Poland and the Slovak Republic. Right now, Viisage is trading right around $5 a share. I wouldn't be surprised to see it make a run back to $6.25 and then $10. But to make sure, I asked Mark Bail what he thought. Here's what he had to add... "On a short-term basis, VISG looks bullish. But you'll want to pay attention to two numbers in the next few trading days... "VISG's 200-day moving average is at $5.69. That means it has almost 70 cents to move before it hits any resistance. If it can break through that, look out. This baby could go to $7. However, should VISG fall through the $4.21 level, you may want to dump it. That would break its short-term support. "But let me reiterate... "Shares of VISG have been making higher highs and higher lows over the last three months. That's a bullish signal, for sure. "If you want to play it safe, the trigger to buy VISG would be if it stays where it is today (i.e. down)...then makes a new high tomorrow. If that happens, you have a bullish conformation." Thanks, Mark. Only time will tell what the future holds for Viisage. But we'll be here watching, It's important to remember that for the past six years, small caps have beat large caps. And the big boys on Wall Street were betting against the trend this year -- and it looks like they may lose. So there's no reason for you to follow them into a sea of red. That's all for now. Best regards, James Boric P.S. As I said earlier, Mark Bail was dead on in calling the Russell 2000's recent surge. He is the finest technical trader I know. And he just put out a brand-new trade for all his MST Trader Alert readers this morning. If you are interested in finding out more about it, please check out my latest special report on the MST System: http://www.agora-inc.com/reports/MST/WPNYF706 (Disclaimer: Penny Sleuth does not recommend you buy any security without doing your own due diligence first. The "TRADE OF THE DAY" is in no way a recommendation. Rather, it is an idea worth investigating on your own. If you choose to buy any stock we mention, you do so at your own risk. None of our editors have a position in the stock.) |