For anyone who is new to this blog expecting to see a bullish write up on ACU.V with lots of fundamental information and projections of monster growth potential and all that other stuff you typically see on stock promotional sites.....you're probably going to be disappointed.
That's not my style.
Stocks are risky, and the risks with penny stocks are even greater. So are the rewards of course, but you have to be careful. Typically penny stocks get promoted and pumped after they've already made big gains, when volumes are spiking and there's lots of news out to get the retail herd excited and buying. Social media sites and message boards become filled with pumpers
If that's what you're looking for, then you should probably move on because ACU.V doesn't qualify. Volumes are thin, on the Canadian TSX Venture exchange average volume for the past 3 months is 73,782. For a stock trading in and around the 15 cent mark that's only about $11,000.00 changing hands on an average day.
Those who've been reading this pathetic and nearly invisible little blog, or if you followed me at other sites like SeekingAlpha (Joe_Retail) StockTwits (growacet) Stockhouse (ledrog)....this should all be very familiar.
My view on stocks in general, and with penny stocks in particular....is that if you're hoping to make big gains, then you have to get in BEFORE the herd shows up, BEFORE social media sites and message boards light up with pumpers screaming BUY BUY BUY!!! If a SeekingAlpha contributor with thousands of followers starts talking about a penny stock as a "Great Investment", or touting a price target that would translate into a 500% gain...Then you're likely going to find a stock that's already jumped 500% or more with a lot of the upside potential already realized in my opinion.
As far as fundamentals go, my opinion (hardly a unique view) is that they are already "baked in" to the PPS. There are three fundamental realities I DO NOT WANT to see. They are what I consider to be the Unholy Trinity, they are: Promotion, News and Hype.
- Promotion is used to get investors watching a stock, putting it on a watch list
- News comes out and because of Promo gets read by the retail herd
- Hype hits the picture when the PPS starts moving, with the sheep convinced the prospects must be good because the share price is climbing
Regular readers already know that there are two sides to a trade, a buyer and a seller. If the herd is being whipped into a buying frenzy, then there have to be others willing to part with their shares at the higher prices. That's the market in a nutshell, and its the reason some players are able to buy low and sell high while the retail players often end up on the wrong side of the trade, buying high instead of selling high.
Do I think this will happen with Aurora Solar? I don't know to be honest, but I do think its possible. If it doesn't I still think ACU.V is a better risk than buying into a penny stock that's already gone from 10 or 20 cents to $1 or $2 on lots of the aforementioned Promo/News/Hype.
Why do I think its possible? The first reason is right there in the subject line, the lure of green energy. This sector is heating up, and I don't see it calming down anytime soon. Stories of global warming and the need for Green Technology and Energy are all the rage. Tesla and Lithium batteries have caught the attention of investors,
Interest in Lithium stocks spiked around 2010 before cooling off, now many Jr Lithium miners have seen their share prices explode over the past year. Could the same thing happen with Solar? No way to know for sure, but I do see the potential. I've started getting emails touting Solar energy plays as a new "Golden Oil".
And who knows, maybe Aurora Solar with execute on their business plan and become a major player in this sector. They're actually not a maker of solar panels, instead they produce measurement and control solutions to help manufacturers improve yield, lower costs and achieve higher margins.
They recently announced (May of this year) an MOU with an unnamed "major solar panel manufacturer". When it comes to news I'm something of a cynic, and a MOU is not a signed contract. But I doubt this news was read by many investors given the lack of promotion currently going on.
A big thing to look for with penny stocks in my opinion is financial strength, or weakness as the case may be. With a 15 cent penny stock I'm not expecting profits or a robust balance sheet obviously, but I do want to know that a company has sufficient cash on hand to fund operations into the foreseeable future. Aurora recently released news about a Private Placement which brings in about $775,000.00 which satisfies that criteria for me.
I also want to know how many shares have been shorted. If there are bears placing big bets on the short side, that for me is a definite warning sign. Shorting is incredibly risky, and with penny stocks the risks are even bigger. With ACU the short interest might as well be zero, its only 2,000 as of June 30th 2016 or just .01% of the 33.2 million issued shares.
Finally there is the chart. Frankly and unapologeticly I love it. That doesn't mean its a slam dunk sure thing. Sure things do no exist in the stock market, anyone who says otherwise about any stock is an obvious pumper. But in the ACU.V I see a lot to like.
The stock has been trading in the 14-16 cent CDN range since the start of June, and back as early as May if you discount one short lived spike up to .20 cents. In other words its trading close to its historic lows and I like to buy low, not high.
I include 3 moving averages, the 20 (near term) 50 (mid term) and 200 (long term). At 16 cents the PPS would be above both the 20 and 50 dmas. MACD (Moving Average Convergence Divergence) is just a hair below the 0 line. I would see a break above that zero mark as a bullish technical signal. And stochastics, the fast line (black) has turned bullishly upwards and has crossed over the slow line (red) from an oversold position at the 20 line.
Finally OBV which stands for On Balance Volume. OBV counts a day's volume as positive (+) when the PPS climbs and negative (-) when the PPS falls. The OBV chart gives an indication of accumulation from April/May forward. Given the lack of Promo/News/Hype I consider it possible that those who have been buying, that they might be what I like to call the "smart money crowd".
That's it folks. I've taken out a position in ACU.V so my opinions are obviously biased. If you want to look at the US side the symbol is AACTF with Aurora trading OTC Foreign.
To sum up my reasons for being bullish and why I view Aurora as having a good risk reward profile:
- Thinly traded and near its all time lows
- Only 33.2 shares issued as per stockwatch up to June 30th 2016
- No discernible Promotion or Hype and very little News
- A chart suggesting the possibility of accumulation
- In a hot sector (Green Energy)
Good luck, and remember...if ACU or any stock makes gains for you...nobody ever went broke taking profits.
No comments:
Post a Comment