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Small cap ideas

|Includes:Network Engines, Inc (NEI), RSH, TSL

With the U.S. equity markets teetering near 2011 highs, I thought I'd list some small caps with interesting chart setups and fundamentals.  It's worth noting my favorite chart technician, Chris Kimble, likes being short small caps right now.

That said, here are some of my favorite small cap ideas at the moment:

The most interesting option I'm watching is Trina Solar.  TSL has great looking fundamentals: TTM 100%+ revenue and earnings growth, P/E of 8.  ROE at 30%+, big net margins, price/book at 1.75.  All very attractive.  With the rising price of oil, alternative energy and solar may come back into favor this summer.  The chart sets up with an ascending triangle.  I'd want to see a decisive break above $30 ro so, but given the fundamentals, I'd buy at the rising support line around 27.30 (today) with a stop a couple percent lower.  I do not own TSL.

NEI is a tech turnaround (small scale business servers/security) that has gone to positive earnings and cashflow in the last year.  The price is well off its highs and the stock has some value properties: price/book is < 1.6, price/sales is < .4.  NEI broke to the upside of the falling wedge and may be basing to form a cup and handle on low volume.  I'll be watching for a breakout above 2.12 or so.  I own NEI.

RSH also broke to the upside of a falling wedge.  Radio Shack is kind of another value play at this point, with single digit earnings growth and a P/E under 10 and price/sales under .5.   It is at a decent buy spot with a stop under the rising trendline.  I don't own RSH and am undecided as to whether I want to jump in.

Interesting that both silver and oil have pulled back hard this afternoon.  I expect to add more 2x oil (NYSEARCA:UCO) if its pulls back to around $60. Silver may be due for a deeper pullback to $38 or so on SLV ($245 on AGQ).  The 20 EMA has a pretty good guide for support since last October.

Stocks: NEI, TSL, RSH