Option Investor
Market Updates

Some small caps still look compelling

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Small and micro-cap investing isn't for everyone, but often times a trader or investor looks to add smaller positions in some small cap stocks that look to be gaining favor. On May 9th, PremierMarkets.com profiled a 1/4 position bullish trade in shares of Dynamic Materials (BOOM) when the stock looked to be breaking out of a base at $2.37. So far, investors have been relatively happy with the stock as it has been holding near recent highs of $2.75 and has so far avoided participating in the broader NASDAQ pullback we've seen lately.

A couple of day's ago, I received an e-mail from a subscriber inquiring on our opinion of another small cap stock in Computerized Thermal Imaging (AMEX:CTI). While I can't comment directly with subscribers regarding individual investments, I can give my two-cents worth in a public forum. Here's a stock that recently listed on the AMEX stock exchange (XAX.X) that seems to be gaining some favor with investors. There's not a lot I can say negatively about the stocks technicals and they speak for themselves. When listed on the NASDAQ, the stock did trade as high as $12 within the past 52-weeks and the stock began breaking out of a base recently at $4.00.

Computerized Thermal Imaging - last six months

I'm usually very hesitant when I get e-mail from subscribers asking about small and micro-cap stocks, but shares of CIO might have a place in a longer-term investors portfolio. Heck, I'm not opposed to even trying to day-trade the things. Today on www.intradaytrader.com I did just that with CIO and the stock has acted well. PremierMarkets.com will keep an eye on shares of CIO and follow its progress, but right now, the stock looks a little extended. It's charts like these that a longer-term trader might actually just ease into the stock and begin an accumulation process. Perhaps 1/4 position at current levels would be appropriate for some subscribers, then if a pullback were to occur near the $4.00 level, an investor might pick up another 1/4 position. Our point and figure charts indicates a bullish price objective of $7.50.

Jeff Bailey
Senior Market Technician

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