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FREE: Freeseas is a small shipper, operating Handysize vessels primarily. See chart below. I have been trading this stock about a year, and made quite a large killing on it during a short covering rally mid-December last year. This year, I began accumulating at about $0.63. This shipper today was now at about $1.32. A large gain was on the table. I thought:
“Freeseas will release financials AMC today. Typically, a dividend declaration is part of it. So we will get it with “both barrels” so to speak. Sell now, before the release, or keep? The short term strategy is to take the money and run. Most of the bulkers have cut dividends, and reported poor results. The operating costs for FREE are among the lowest in the industry, though, and the co has mostly H-size vessels which are small, nimble, and kept busy. Counterparty risk has been low for FREE, lower than with some rivals such as SBLK. But the market is greedy, and may just sell even if the news is fairly good. We don’t know. The long term strategy is based on the co’s continued survival and good prospects, and that is something we do know. There is a decent chance of a dividend restoration or increase NEXT quarter. Share price would skyrocket at an unanticipated dividend increase. So do I trade according to what I know, or according to what I don’t know? Tomorrow this stock could fall to 75 cents again. Or, it could be 2 dollars. Given the situation, I think it is a good idea to sell.”
That is what I did. It was the largest holding of a small stock in my portfolio, and making over 70 cents a share was quite a nice gain. The chart shows another reason I sold. The stock price had reached a region of resistance and was likely to linger there for a while. The behavior in the past 3 days showed the stock reacting to the resistance zone already. I left buy orders to scale back in, but the highest price was $1.09. Unless the stock breaks free of some of the resistance, I will be in no hurry to pursue it. Meanwhile, I have lots of new capital to play with. Looking at my FTK position, thinking about increasing it. Or maybe a new play in a driller like REXX. Or resource company TXCO. I am not decided. I want to enjoy this moment.
So what were the earnings reported? The company missed moderately on both earnings and revenue. The CEO stated that the co expected to be profitable for 2009. In extended hours, the stock was trading lightly up as if little had happened. There was no mention of dividend.
Then there was Flotek Industries. See chart below. Also see my article published here a week ago. The chart shows a great deal of upside potential for the stock, more than FREE. Flotek has already cleared near term resistance at $2. This play is on track! It is not too late for other traders to begin accumulating FTK as well.
In general, Smallcaps were whipsawed violently yesterday. Yesterday was a repeat, only worse, of the day before. The market has been making large intraday moves without a convincing daily trend. That behavior is common at decision points, where profit taking increases nonlinearly with price, causing selloffs, but new buying is disconnected and happens only much lower. When this happens, it is like the entire market has a gigantic bid-ask spread. Market tops and bottoms can have this, but also key levels. I did not feel today it was easy to be confident of market direction. Today’s action, however, gives us confidence that there is enough power in the move to carry us further.
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