Feature: NASDAQ Setting Up. Novelos Pullback. Coverage Changes.

The challenging September-October market period is predictable as usual and, while not really crappy, most trading action has definitely been lackluster. While the NASDAQ does appear close to a rally point, we feel that a snick more downside/consolidation is in order.

Since the NASDAQ COMP peaked at the beginning of August, there have been two further failed rally attempts, each halting at lower respective highs. We believe the next stop is the 2000-2016 level, should the market take out the June support at 2050. Once it hits there, there will likely be increased fear and a lot of towel throwing as investors turf out stocks. We could then see a decent year-end rally should the market move to the 2000 level, which isn’t far from here, especially if the decline holds at that level. This period of the year seems to be acting in a pretty consistent fashion and the result will likely be a decent improvement once the weak hands are shaken out.

Novelos Pullback

In a perfect world, good companies would do nothing but have rising share prices based on their potential and improving fundamentals. Of course, that rarely happens. Time, material developments combined with the robust and ongoing participation of a growing number of investors is really the only path to rising prices. Even with that said the path is rarely smooth or predictable in the short term, even when a company has strong products, potential and prospects.

Such is the current case with biotech Novelos (OTCBB: NVLT). A read of our archived pieces on the company will leave investors with little doubt that the long-term potential of the company is compelling to say the least. The fact that the shares have pulled back to roughly $2.35, while annoying, doesn’t bother us. The price may even move lower given the vagaries of the market and the increased volatility while the indices consolidate as we mentioned in the previous NASDAQ update.

In our opinion, NVLT shares accumulated in the $2-$2.50 level will likely yield superior returns over the next 12 months.

Ever since we began covering NVLT the erratic volumes have tended to exaggerate moves both up and down. While those volumes are increasing allowing investors better opportunities to trade the shares, pullbacks such as that we are currently experiencing tend to last longer and get to extreme levels. Technically, we would like to see the shares stay above the $2.60 level. With the shares currently at $2.35, without a resultant bounce, the chart shows us that the next stop could be roughly the $2.00-$2.20 level-- a return to June pricing. 

Given all the news since that period, it is apparent to us that while the share price may have weakened investors have an opportunity to pick up stock at depressed prices here and on any dips to augment a position for future gains.

We would reiterate our direction October 2nd to read, if you haven’t already, Cohen Research’s exhaustive report on Novelos here: http://www.smallcapdigest.net/news_images/novelos.pdf

The company has and is embarking on a series of institutional investor road shows to get the story out and, as we have noted often, has a strong calendar of clinical development milestones that it is and will continue to execute. The recent Phase 1/2 results for NOV-002 for the treatment of Non Small Cell Lung Cancer (NSCLC) is merely one in a string of substantive developments on the road to commercialization.

As well, the company is working—and we expect news soon—on the efficacy of NOV-002 for the treatment of radiation sickness as well as more information regarding its NOV-205 compound’s effectiveness for patients with Hepatitis B and especially C.

The NVLT story is both solid and compelling. The current pullback --and frankly any more weakness that may result-- we see as an opportunity for long-term investors to strap on a company that has both the products and potential to deliver great returns over the next 12 months, if not before.

Over time, investors who use share price weakness to accumulate a position fare better than those who let the weakness use them.

Re-arranging Coverage.

As you’ve noticed, SmallCap Digest has begun bringing our readership some new --and we feel-- very exciting trading and investment ideas for your consideration. And there will be more.

To that end, and only to make room for these new names, we are dropping coverage of two stocks that have yielded very nicely for the readership; Biophan and MIV Therapeutics.

Biophan (OTCBB: BIPH) is a stellar stock and the future potential remains enormous. We brought you the shares in December 2003 at 35 cents. The shares are currently $2.25. That’s more than a 500 percent return, not including the many trading opportunities that appeared over that two years. 

MIV Therapeutics (OTCBB: MIVT) appeared in readers’ email boxes in March 2005 at 34 cents. Currently $1.52 that represents roughly a 350 percent return. MIVT also has immense potential and we would encourage investors to continue to watch the company.

Any decisions to buy or sell shares will now be down to you. We are confident that both companies have stellar potential and futures, but in the interest of keeping the ideas coming, we must make these adjustments to our coverage.
 
 

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