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Monday, May 25, 2009

Why DDRX and OGXI keep going higher and MRM is next in line

DDRX is a coffee stock that closed at $0.41 per share on February 19, 2009. This Friday May 22, 2009 the same stock closed at $15.75 for a 3741% gain See Historical Prices !!!

On April 20, 2009 the Company reported a turnaround quarter of $0.25 EPS compared to a loss of $0.39 EPS the prior year. Read Press Release. That news sent the stock from $2.01 on April 20 to close at $4.44 the next day for a 121% gain. The stock did not stop there but continued to rise to close at $7.40 on April 29, the day GMCR reported earnings. DDRX's growth is tied to GMCR because they sell the K-cup packets for GMCR's Keurig coffee systems. GMCR's earnings drove to hit an intraday high of $12.28 and a close of $11.50 on May 7. For the next 3 trading days, May 8, 11 & 12, DDRX sold off and acted weak as can be, hitting the $8's on the May 11 & 12 to close at $9.89 on May 12. Since then the stock has continued to move higher to close at $15.75 this Friday May 22.

What is my point? This stock has continued higher for two reasons. Reason number one there is substance to the business turnaround ($0.25 eps) and the sector is hot (coffee brewed at home). Reason number two is because shorts keep betting against this stock which has a very low float. When this stock pulled back during May 8, 11, 12, people were betting against this stock because it had risen from $0.41 and they saw this as the first sign of weakness. It was during this pullback to $9 that I was pounding the table to buy at where I also post. Shorts were arguing with me, saying DDRX is overvalued, has run up too high, and every other reason they could think of to convince people this stock was going down. post 1 post 2 post 3

I ended up selling in the $13's and $14's and have a few freebies still riding this monster stock. DDRX is still going.

OGXI is a biotech that has gone from $8 to $21 in the last week. Yes, we know it is a completely different sector but same effect. OGXI is a biotech that had great results from a drug and is headed into ASCO next week for a presentation. So there is substance to the move but shorts continued to short it from the $9's because it has risen so much (as well as various other unsuccessful reasons).

Next is MRM , which I first called as a buy here at $6.40 See Blog Post on a fundamental turnaround in there business. The stock was as low as the $3's when earnings came out and it closed at $10.85 on Friday. MRM has a lower float and outstanding share structure than both DDRX and OGXI. Due to the turnaround in its business it has an EPS run rate after last quarter that could support a price in the high teens or $20's (with a reasonable historical P/E) like DDRX and OGXI. If we get a pullback on MRM, the shorts will be saying it is done because it has risen so much, however I will be buying on any pullback of substance, because just like DDRX and OGXI, I think MRM is going higher and we have only seen the first wave. If you missed my call at $6.40 I am NOT saying to chase it but watch for any significant pullback (I would send out alert if that happens). This company and its products are in demand (by the recent growth) and it now has EPS to support a higher share price.

An excellent momentum chartist that I follow, Picture of Power has said the same thing .See Picture of Power on MRM.

In summary, DDRX and OGXI keep going up because they had fundamental turnarounds of substance in their business that supported a higher share price and shorts kept betting against them. MRM is in the same category with a lower float and I am watching to see if we get any kind of pullback or just keep shooting higher.

No comments:

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Welcome to, blog home of Superman. Purpose of this blog is for me to discuss my trades and stock ideas (As well as opinions and rants on stock market related issues). I will mention the date and price I enter. As far as exits, I always try to take half off when I have some profit and if I believe in the stock, let the rest run further. I always also use mental stop limits, at which time I would exit and minimize any losses. I do not like to give price targets unless I can support them by P/E in some way or by comparison to another stock. I just post stock trades and ideas that I believe will go higher (or lower for shorts) and the reason I believe that. Individuals should have their own strategies for managing profits and losses. My stock picks tend to NOT be daytrades at all and many take time to move. I am not an investment advisor and this blog should not be considered or followed as investment advice.