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Yesterday's Most Traded Stocks - SPNG, BIEL, LEA, NEPH

|Includes: Lear Corporation (LEA)
OK, just to be clear, the four tickers we're looking at today weren't necessarily the most-traded stocks; they were the most-traded relative to their normal activity. More often than not when you see that happen, there's a reason for it .... a reason worth knowing. So, let's dive into Spongetech Delivery Systems, Inc. (OTC:SPNG), BioElectronics Corporation (OTC:BIEL), Lear Corporation (NYSE:LEA), and Nephros, Inc. (OTC:NEPH),  and figure out what the deal is.

Spongetech Delivery Systems, Inc. (OTC:SPNG)

It's back. This is about the 15th time we've examined this penny stock in the last couple of months. As before, we think it's a great 'trading' stock, meaning it tends to rise excessively, than fall excessively, in a fairly dependable pattern.

We can't help but wonder though, has the chart used up most of its back-and-forth life? After peaking at 28 cents on the 12th, then falling to a low of 7 cents on the 13th, maybe the swing was so wild that it spooked everybody away.

It's a little too soon to make that call, but don't be surprised if the party's over.

So how did SPNG make this list then? Most likely it was late-comers trying to recapture volatility that's just not going to materialize. Though volume was higher yesterday, it was nowhere near the volume surge we saw earlier in the month.

If you must trade it, I think there's a little more downside to go before the next up. Maybe support at 4 cents will be revisited?

BioElectronics Corporation (OTC:BIEL)

A newcomer that lit up the message boars a little more than it lit up the results board.... this penny stock gained 53% on its highest volume day ever. It's not tacked on more gains today, but it's not giving up a lot of ground either.

From a short-term perspective I suppose you could play the trading range that has developed since early May. The lower edge is around $0.006, and the upper edge is around $0.016. Both are rising. Be careful if you play that game though - BIEL is dead center of that range right now, and can't decide which way to move.

Frankly, I'm more interested in BioElectronics Corporation as a longer-term idea, now that some major long-term technical hurdles have been crossed. Namely, shares are above the 200 day line for the first time in, well, really, years. They're also at highs we've not seen since November.

The fire was lit by a string of encouraging news dating back to mid May. The biggies were the request for 510K clearance (selling approval) of their Allay product (menstrual pain patch), and yesterday the company was awarded a patent on a certain way to apply an electromagnetic field to bodily tissue.

The chart is 100% news driven right now, but it seems to be working fairly well in favor of the stock.

Lear Corporation (NYSE:LEA)

NYSE-listed Lear Corp. was all the rage yesterday, but not in a good way. The auto parts maker officially filed for bankruptcy.

The standard answer should be 'stay away from bankrupt stocks'. In think in this case, however, the bankruptcy was already built in... meaning LEA could be compelling once reorganized by a successful bankruptcy.

Well, I suppose 'successful' is relative.

Keep it on your radar, but I'm not buying at these levels (nor am I buying until I see how the company will emerge from the restructure).

Nephros, Inc. (OTC:NEPH)

This isn't our first encounter with this penny stock either; we first saw it on the 15th, and were worried that hype-based run up was out of gas.

And, we were right ... the stock's gone nowhere since then.

As for the initial reason NEPH ran from 5 cents to a peak above $1.50 (it's no settling in around $1.10), it was simply speculation that a dialysis filter would be approved by the FDA, and that a water filter would be approved for sale.

Neither has been approved yet, surprise surprise. The pumpers are still working very hard though.

Our take is the same - any approval seems to be built into the price already, leaving the stock nowhere to go. If the approval never comes, the longs are apt to get bored with holding dead weight.

That's it for today, but check back early and often for more analysis of penny stocks. Better yet, sign up for the free e-newsletter today (delivered 2 to 3 times per week), and get our specific picks sent straight to your inbox. Here's a recent example.