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January
5

15% pop does not make Hovnanian (HOV) a buy

Tags: hov

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I received a few emails today regarding the high-volume spike in Hovnanian (NYSE:HOV), once a high-flying homebuilder and now a beaten down microcap with a market capitalization of only $144.51 million after today’s surge.

hov

While the stock did spike more than 15% today on high volume, I don’t find much to like fundamentally or technically. Like most homebuilders, analysts are expecting massive losses from Hovnanian in 2009. Housing numbers are still dismal, and though many assume that the market will rebound in late 2009, nobody really knows.

Technically, HOV still trades under the 50-day moving average, and faces a lot of overhead resistance.

Bottom line: a rally here is not unthinkable, but I see no reason to jump in until it takes hold.

DISCLOSURE: No position.

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January
3

Denison Mines (DNN) Surges

Tags: dnn

Denison Mines (Amex:DNN) more than doubled last week, with explosive volume on Friday. I expect we will see this kind of a pattern in many microcaps this January, as deeply-oversold conditions fuel upside volatility.

dnn

Get trend analysis for DNN from Ino.com

Was there any news behind last week’s move in Denison Mines? Yahoo! Finance doesn’t show any press releases, and though there was a filing friday with the SEC on Form 6-K, it merely attached a December 23 press release announcing a successful financing. According to one of my readers, the stock was mentioned in James Dines’ newsletter, but I find it hard to believe that Dines has that much pull.

At the end of the day, it doesn’t matter why Denison Mines or other microcaps are moving up. The fact is that they are. There will be days of retracement, but this is a simple trend-driven market. Don’t overthink it. If Dennison falls below the 50-day moving average — the blue line in the chart above — then the trend is over. Until then, nobody can say how much higher Denison, or any other beaten down microcap, will go.

Update: thanks to the reader who alerted me to my misspelling of the company name, which has been corrected.

DISCLOSURE: No position.

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December
31

Early “January effect” for Versar (VSR)

Tags: vsr

What could be the strongest “January effect” in years started early for a few microcaps. Some stocks begin to show the seasonal strength in December, usually because sellers are fully exhausted or the company issues positive news. Both of these factors appear to be in play for Versar Inc. (Amex:VSR), a stock I bought last week. On December 22, 2008, Versar announced that it had been awarded a $9.44 million contract to build a facility for the U.S. Army. Versar posted over $111 million in revenue over the trailing twelve months (per Yahoo! Finance), so the contract wasn’t huge but it certainly is an incremental positive. More importantly, the defense contractor is profitable, has a record backlog, and has over $1/share in cash on its balance sheet.

vsr

Get trend analysis for VSR from Ino.com

Curiously, the stock did nothing that day or the next few. But on the Friday after Christmas, usually a light session, Versar began to spike on huge volume. The move continued Monday and Tuesday, chalking up a quick 30% rally.

It would not surprise me if Versar retraced back to the breakout point (the blue line in the chart above). However, I still like the stock and think the move has another few dollars to go.

DISCLOSURE: Long VSR.

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December
20

High volume microcaps

Tags: ann, atsg, egle, ftbk, gte

Here are a few interesting microcap (and near-microcap) charts with heavy volume for the week ending December 19, 2009 (market cap. figures courtesy of Google Finance):

1. Ann Taylor Stores (NYSE:ANN)

Market Cap: $346.81M