Small Cap Network's  Instablog

Zoltek Companies, Bio-Clean International, and Majesco Entertainment all could be primed.

Picking the right stock is half the battle - picking the right time is the other half. A quick look at Majesco Entertainment Co. (COOL), Zoltek Companies Inc. (ZOLT), and Bio-Clean International, Inc. (BCLE.PK) reveals whether now is the right or wrong time to step into a position for each.

Bio-Clean International, Inc. (BCLE), after a disastrous May and June, has managed to draw a buying crowd after posting some significant - and tangible - news regarding revenue in early July.

The Defense Supply Center ordered five additional weapons cleaning machines early in the month, and 17 barrels of Bio-Clean's weapon-cleaning fluids were sold later in the month. All told, July's sales totaled more than $100,000. The amount may seem minor (and it is for most companies), but for this pink sheet micro cap it's a windfall.

Shares of BCLE have responded favorably to the good news. Long-dormant - like the company - the stock has finally exhibited hints of positive momentum.... also like the company. While shares haven't made great gains in recent weeks, they have persistently attacked resistance at the 20 day moving average line. More importantly, the net buying has ramped up. A break above the 20 day line could act as a slingshot for the chart. A couple of higher closes above it would be a good confirmation signal for a breakout.

The ceiling/resistance at 14 cents is the target level for any breakout move.

The daily chart of Zoltek Companies Inc. (ZOLT) may be encouraging, but the weekly chart illustrates an even bigger paradigm shift for shares.

In a downtrend since late 2007, the early-June cross above the 200 day moving average line (blue) suggests shares have finally bucked their weakness. ZOLT was pushed lower again in late June and early July, but the 200 day line acted as support, and appears to have restarted the rally.

Zoltek is getting legitimate help from high-profile opinion pundits as well. TheStreet.com has pointed out repeatedly that options traders are betting on the company, and the Motley Fool has bullishly featured the carbon fiber manufacturer as well.

But what about Q2's earnings miss? Revenue was off by 27%, and the EPS of 1 cent was 8 cents under the average estimate.... with weakness in wind power named as the culprit. In short, it's history - and already built into the price. The recent action from ZOLT is more in line with the positive forward-looking estimates that better reflect wind power's and carbon fiber's demand.

A long-term target of $32 for the stock isn't unreasonable; a confirmatory breakout signal would be a close this week above last week's high of $10.43.

First and foremost, Majesco Entertainment Co. (COOL) are well overbought from a long-term perspective. The run from 40 cents in late 2008 to above $2.00 now is simply a case off 'too much, too fast'. Moreover, the recent peak of $2.39 is in line with 2007's highs as well; to see a stall here is alarming, as it hints that others are seeing the same potential ceiling. On the other hand, never say never... long-shots occasionally work out.

Before any breakout can take hold though, traders should note the stair-step pattern COOL shares have been making since late 2008. Strong, brief rallies have been followed by multi-week periods of flat movement. The rallies, as one can see, have frequently been prompted when the 50 day line (purple) has been tested as a support level. In other words, after last week's upside move, Majesco shares may need to walk sideways until the 50 day line catches up.


Majesco Entertainment, a gaming software developer, has been supporting the stock's increase in value with launches of several news titles for the Nintendo DS, the Nintendo Wii, and the Xbox 360. The forward-looking P/E is a modest 9.4, and Majesco has beat estimates in three of its last four quarters. The combination of a likely 'beat' on top of more new game launches in this quarter than in the same period last year slightly improves the odds for the stock's breakout above $2.39.