Wednesday, July 7, 2010

GPRP Watch

The catch from this morning's collecting of emails touting stocks with insanely profitable futures is Grid Petroleum Corp. (GRPR), and unlike many that show up in my inbox, GRPR appears to be the flavor of the week beyond a single email promotion.

Grid is a London-based oil and gas development company with its projects focused on Wyoming.


The company began active work when it purchased Wyoming mineral assets last March -- although its ancestor has a price history going back to 2006, it is in essence a new start-up -- and there are no financials available.

A Swiss company, SISM Research, set an 18-24 month target of $2.20 per share, based in part on a valuation of those assets.

So the company exists in an information vacuum, for traders at least. It has a story, it has an analyst target, it has an asset valuation, and it has a short price history.

The guy praising the stock in email says that he specializes in Wyoming properties, and that he on average makes six winning stock recommendations per year, with huge gains as prices rise two-fold, six-fold, even 13-fold.

His price target for GRPR is $62.

Clearly, he's from the Babe Ruth school of stock analysis: Go for the home run, not the steady program of base hits. It worked for the Babe, but most of us aren't in his league.

GRPR may indeed have such a glorious home-run future ahead of it. Or not. The question for me, as a fact-based trader, is would I buy the stock today?

First, GRPR has been in a downtrend since a swing high of $1.68 on May 3. This alone runs afoul of my deep prejudice against counter-trend trades. Moreover, the technical indicators at this point are mainly bearish. The exceptions are the macd and fast stochastic, which are rising, although neither is yet in bull territory.

The parabolic sar has been in bear phase for six trading days, preceded by 10 trading days in bull phase, during which the price declined slightly. This tells me that GRPR produces signals that aren't profitable, and the low average directional confirms that it is not a strongly trending stock.

In the run-up to the May peak, GRPR recorded top volume of 1.3 million shares, and then faded, trading most days below 50,000 shares. Yesterday's volume spiked to 1.1 million shares on a large intra-day decline. I take this to be speculation connected with the promotion. In other words, GRPR is mainly illiquid, and could it be  prone to manipulation?

Bottom line: I would never buy a stock with this sort of chart. In the case of  GRPR, I would want to see some evidence of an uptrend, and at the least a break above the very near term reversal level of $1.05. Even better, I would want to see a break above the $1.68 swing high, the high reached coincident with the ownership change.

On the downside, yesterday's trading pushed the price down to an all-time low of 5¢, an anomaly well outside the expected progression.

Reversal Levels
  • $1.68, +124.0%
  • $1.05 +40.0%
  • $0.75 <== You are here.
  • $0.62, -17.3%
  • $0.05, -93.3%
The reversal levels are really extreme, yet another reason for extreme caution.

The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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