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The Mother of all Short-cover rallies?

May 6th, 2008 · No Comments

We hope we can be forgiven, but we had quite a day. We advised to buy SIGM at $20 this morning, and didn’t even have the time for a proper write-up, but we felt it was going to run, so we left it at a few sentences, leaving the write-up for later in the day. 

The rally that looked likely did indeed materialize, and by the time we published the write-up, the stock was close to $23. It closed at 22.50, thereabouts.

Another company we’re following since the inception of this website, Trina Solar (TSL), also had a good day. We originally advised to buy around $33, it is now back at bumping up against it’s 200 day moving average were we advised earlier to take some money off. Interesting to see what will happen. If it breaks out, buy. That $200 oil prediction cannot hurt.

As nice as these were, the real action was in InterOil. We have been bullish all along, advising a hedged option strategy, and that now seems to bear fruit. Two parties intimately familiar with the situation have come out with very bullish reports (one voted with it’s wallet, actually).

Wayne Andrews, from Raymond James used very robust language to describe the flaring at Elk4 earlier, and already mentioned it as a multi-billion dollar discovery. Then came Clarion Finanz, which converted an outstanding loan into equity a dollar above yesterdays close.

The writing must be on the wall, as the stock exploded on volumes not seen for quite some time, and it closed just under $26, up almost 20% on the day.

We think a lot more is in stall, the large short parties, who have resisted for so long, must now be very nervous, if they aren’t already twisting and turning in the wind.

The good fundamental news might very well get a huge boost from the mother of all short-covering rallies.

There are two possible roadblocks. Merrill might still be greedy. We don’t think this is more than a possible temporary roadblock, as long as Elk4 news remains good (which it very likely will). Wayne Andrews also argued that there might still be time to bring in a strategic partner. If that happens, the shorts are toast.

Tags: IOC · SIGM · TSL