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Daily Report December 17, 2010

|Includes:VASCO Data Security International, Inc. (VDSI)
Market Analysis

We saw some accumulation today with higher prices and volume (in most indexes anyway). The higher price and volume increases in small cap is reassuring to the fact that risk taking is still being shown. When small caps outperform, it is indicative a risk taking vs. risk aversion. We are approaching a very bullish setup in the market, during a bullish seasonality period. With the resilience of the markets, I would maintain your longs.

In our longer term chart of the S&P 500, we see some very bullish looking price action. The 8 month range or consolidation could set the index to run up quite a bit. The breakout seems to have some volume too it, and lately the market just won't go down. I see so many people shorting at different levels, however, my experience has shown me not to fight the market, simply go with the trend till it ends, and currently that is clearly up.

 Equity Analysis

Here is a stock with a very nice chart pattern, other technicals are not the best, and the fundamentals are lacking, however, the price itself is telling us that some good things are happening with its supply and demand. Remember, ultimately, it is not revenue or ROE that make a stock go up, it is more buyers than sellers, and VSDI certainly has that. VASCO Data Security builds computer security systems, which has been a strong industry for some time now. There seems to have been a "hiccup" in earnings recently that is not going to continue. These few quarters of interrupted EPS growth that is not sustainable often set up a chance to enter a strong security. The past surprise in earnings alerts us to possible upcoming surprises in the future. also, I see no debt with VASCO and an attractive cash flow for the company.

On the weekly chart we can see that it is not only about to break out of a small flat base, but a long-term range. This multi-year base is very important to the upside of this stock. Think of a base as building energy. As time goes on, its potential energy increases more and more. Now, as the stock breaks out, it begins to turn that energy into upside appreciation. This, combined with the very low float of 28.1 mil should allow VSDI to move quickly if it breaks out to the upside. The Current Rankings are:
  • Fundamental - 47
  • Technical - 72
  • Acc/Dist - 64
  • Composite - 76
  • Special - 76
Stocks: VDSI