|The Rider is Back on the MCLN Horse, But Will It Run?|
|By Staff and Wire Reports|
|Thursday, 03 December 2009 02:29|
Here is a re-cap of the action thus far:
On Sunday, we alerted our subscribers about a stock that we continue to feel has incredible potential for great returns.
On Monday morning the same stock- which had been rising dramatically on a parabolic run from sub-penny levels gapped up and ran as high as $.075 before a tremendous wave of selling hit the shares.
Yes, this type of profit taking can be seen at the end of several sessions during a parabolic run, but something smelled rotten even then. Frankly, it caught most everyone by complete surprise.
"Parabolic runs occur in stocks that exhibit extreme behavior to the upside which is unsustainable," explains John Netto, author of the book One Shot One Kill Trading. "These stocks take off for a number of reasons but they can leave investors holding the bag after they retrace a large portion of their gains. A parabolic run depicts greed at its finest, with buyers tripping over one another trying to get long."
The reason people were tripping to buy was obvious, this is a clearly undervalued stock in a sector where companies trade based on 14-25x earnings (not 3-4x earnings like most other stocks). Still, even the most bullish stock has to breathe on the way up. This was the second, multi-session, parabolic run for MedClean and the stage is set for another run to take place.
At the end of these parabolic runs, people take profits and the stock can re-trace 50-62% or more.
One can easily argue that this is a textbook example of what happened here, but the jury was still out as far as some were concerned.
After all, rumors began to circulate that insiders had begun selling hard against the incredible volume and visibility that our readers brought to the stock.
We immediately called the company and they vehemently denied that anyone on the management team was selling. This particular company is managed by an extremely serious, dedicated and experienced team that had taken at least one other company and matured it to over a billion dollar market cap. That was one of the main reasons we liked the stock to begin with.
Why would they do this to their new company now? It just didn't make sense.
Despite the rumors, interest and volume in the stock continued to rise, but for the following two sessions, every eager new buyer was still being met with a seller.
Were the market makers who are still short the stock playing games?
The float just kept churning, even as the enthusiasm and excitement continued to show up every morning for trading.
At the crack of dawn on Wednesday, traders were met with a story that we had chased over night.
That was a very important development and when our Anti-Trust Medical Waste Story hit the news wires, shares of the smaller emerging competitors in the sector like MedClean itself and BioMedical Technology Solutions (BMTL.OB) were taken over by the bulls and they never looked back. Even on a down market day, both stocks closed at their respective highs at the end of the day. Very bullish.
Almost immediately, another wave of rumors hit the street. Ugly rumors. Rumors that threatened to make this entire play look like the biggest pump and dump scheme our readers had seen in a long time. We had to chase down and confront those rumors with facts.
BiomedReport's Len Berner helped uncover a filing that unmasked the silent seller which had crashed our pick's party on Monday.
According to the mandated filing, Manatuck Hill Partners, LLC had been dumping shares and warrants from their MCLN portfolio into the market. All the way down, in fact, the shares were just being disposed of with little regard to lower and lower prices.
Manatuck had been a huge holder in the company and at one point even appeared to pick up more shares- a sign that early investors had hung their hat on as yet another reason to buy-in to this hidden gem.
Was this a terribly bad sign? A horrible omen?
Why sell now when logic would seem to indicate that prices are set to rise higher given the attention, volume and healthy consolidation we had just seen?
"Manatuck was the spin-off of the Pequot Scout Fund," explained Scott Grisanti, Chairman of the Board at MCLN. "Pequot as you may know radically transformed their operations, not quite a shut down or liquidation, but close to it."
Indeed, according to an article from HedgeTracker dated May 29 of this year, the investment team that managed Pequot Capital Management’s small-cap focused Pequot Scout Fund spun off from the troubled firm to create Manatuck Hill Partners. The new firm was supposed to continue to manage the Scout Fund, but as some insiders explained: "What we may be seeing here is Pequot catching up on paperwork, closing out accounts or simply ridding themselves of assets."
"The spin off, ten person team that planned and formed Manatuck had gone on record and said that they wanted to be independent from Pequot on July 1, but share prices and warrants may not have been exercisable until now. Their investment/financing decisions could be little more than an unemotional shuffling of paper, and that certainly seems to be the most logical explanation. Especially given the subsiding number of sales. It appears the group has divested itself of all the shares/warrants it can for now. That's not to say that there may still be some restricted shares or warrants that exist, but those do not appear to be exercisable any time soon from what we can see."
Given the way the bulls took over the stock at one particular point in time during the day on Wednesday, it certainly looks like that vicious selling may finally be over.
As one trader put it, "The rider is back on the MCLN horse." But will the horse now continue to run?
Our technical analysis chart certainly indicates like it might.
In fact, if the stock can break some minimal resistance at $.04, traders could get confirmation of yet another break-out run. Who said investing in this sector was boring?
Please be patient and look for the second part of our three part special on MCLN here tomorrow. A very lengthy interview with the management team at MCLN was originally set to be fully transcribed and released here by now.
In fact, we had hoped to bring you at least part of that transcribed interview today, but as you can see- we were sent on yet another chase trying to track down the facts presented herein.
We hope it was worth the wait.