Synthetic Biologics A buy

I'm adding Synthetic Biologics (SYN) to the blog's portfolio. This is a bio-pharma stock that strangely enough trades on the Amex. (click on image to enlarge)

I bought this at $2.45 after a clear break of the resistance at $2 on massive volume increases. I am working on a Seeking Alpha article on this stock which will be a premium submission (exclusive) so I can't say much about it here. I'll post when the article can be seen at SA.

Full House Resorts A No Buy

The direction out of the large formation I outlined in my previous article is now pretty clear - down. After looking at some nice things about this stock, I said that it shouldn't be bought until it broke the pennant to the upside. It came nowhere near doing this and has now gone into technical weakness. It may go into another technical condition later on, but that will probably take awhile.

Materials Science (MASC) Being Bought Out

I put MASC into the blog line up about a year ago at $9.27 with the title "Materials Science Could Climb Soon".  Well it did climb to $11 in 3 months, but then became a disappointment as it drifted for many months. Then over the last 3 months, it re-energized up to $12. Now Zinc Acquisitions Holdings has snapped it up for a price of $12.75 all cash and it appears to be a done deal. All major players including the major insiders owning 19% of the shares are in favor. There is a 35 day "go shop" period to Feb 12 for MASC to entertain other offers. So barring such an offer, MASC is out of the lineup with a gain of 38%.

Full House Resorts Building to a Possible Climb

Full House Resorts (FLL) is a gaming properties company operating out of Las Vegas with casinos all over the US. The casino stocks have been breaking out over the last year after being decimated by the recession. They've been relatively flat for awhile, but are now moving into huge catch-up climbs with MGM being a prime example. If you don't like to chase a climbing stock but want to add a good casino name, consider FLL.

The most repulsive thing about them is the debt level, which at $67 million is slightly more than their micro market cap of $52 million. I don't like debt anywhere near market cap, but if you look at the balance sheet you see a high retained earnings number with annual assets running more than twice annual liabilities. They produce good cash flow, which is leading a current off-trend dip in eps back up to a very strong trend upward:

That skyrocketing black line is the revenue, producing a price-to-sales valuation now of 0.3 with price-to-cash flow of 7.4 - about half price compared to the Dow.  Note how the market placed high potential on the business model and prospects for this company back before the recession with PEs of 70 to 90. Now as those prospects seem to be coming about with results, the market has abandoned the stock with PEs barely perceptible on the above graph.

All this makes me more conciliatory to the high debt.  In a July 30 news release, Brean Capital announced some lowered estimates, but they rate it a buy because "the firm still likes the stock given its stellar balance sheet and management experience in operating gaming properties". The technical condition is one of a stock about to make a strong move:

It has been working on a pennant formation for years and you would have to suspect the direction out of it to be up. This stock should be watched very closely, but not bought until the post-formation direction is made clear.

Telular (WRLS) Buyout

Back on August 18, 2009, I wrote an article Telular And The Smartphone Revolution adding it to my "Smartphone Index".  Yesterday they announced they were being bought out by Avista Capital Partners for $12.61 per share. So, after 19 years as a mostly hated public company (the kind I like) they will be no more, at least as an investment. It was at $2.95 a share when I put it into the index, so it will leave with a +327% gain - but not so fast.

The proposed buyout has been approved by the board of Telular but is now triggering a rash of lawsuits against Telular for accepting an offer considered by many analysts as too low. The analysts figure more like $18 would be fair to the shareholders. According to one of the band of lawyers, Powers Taylor LLP, “due to analyst’s estimates, the proposed sale price, the size of the deal and other factors, we believe this transaction may undervalue Telular’s stock. Our proposed lawsuit will seek to ensure that shareholders are receiving the highest share price for their shares.” 

I don't know how this possible litigation will affect the buyout price, so I am going to leave it in the index for now. If it looks like the lawsuits will not prevail, I'll take the $12.61.

Read more here: http://www.heraldonline.com/2013/04/29/4815476/telular-shareholder-alert-briscoe.html#storylink=cpy

The Platinum Indicator

In my previous post. I said that the silver shake-out indicator being set up is one of several signs that the long consolidation in the precious metals was nearing an end. Another such indicator is platinum. For whatever reasons, it has long been observed that platinum tends to lead gold in major moves up. One reason for this that comes to my cynical mind is simply that platinum is not as heavily manipulated and suppressed as gold. So as big money moves back into the PM sector, platinum winds up being the trailblazer.

As a past example of this, let's take a look at how the big move out of the 2005 consolidation range took place. Since a weekly bar chart filters out a lot of distracting noise, lets compare gold and platinum over that time. First, what did gold do?

Gold bounced around in the range making several trips to the bottom before finally breaking out in September. Now let's look at what platinum did:

Platinum did not go to the bottom of the range toward the end and broke into the major rally many weeks ahead of gold.

This pattern does not always hold true, but platinum has a very strong tendency to lead gold - and at the tail end of the train is silver, the most heavily manipulated of the metals.

So what is gold doing now on the weekly chart?

Gold sank to the lows of the range at what will likely be near the middle, in May of last year. It is now stuck in the lower half of the range and has not broken the downtrend line formed since the high it made back in October. What's platinum up to?

Platinum was a little more hesitant to hang around the May lows and began acting better than gold after this point. And just this past week, it forcefully broke the downtrend line from October and is now well into the upper half of the range on good volume. It seems to want to again lead gold out of the range.

The Silver Shake-Out Indicator

We may be nearing the end of a long consolidation of over a year in gold and silver. There are many signs of this, but I would like to focus on just one here - the silver shake-out clue. Since the beginning of the gold and silver bull market, there has been a certain pattern happening like clockwork signaling the start of each of the major advances of the precious metals. You can see this clue develop over the course of each of the major sideways consolidations of many months. I recently detailed these - see  Is There Another Silver Shake-Out Coming? This shows the cases where this has played out before. I will not clutter this piece with that, you can peruse my blog article for such clutter. I will just show here the generic silver shake-out:

You don't have to be a psychologist to see that this pattern seems to be designed for maximum investor discouragement and is ideal for short-term owner release of shares and/or metal. There is also the 2010 version of this, which was more pronounced that the previous cases. There seems to be a law with these shake-outs - they get progressively bigger, and the following climbs get more massive as the bull market continues. The 2010 case looks like this:

This was a somewhat malformed iteration of this fractal with the triangle formation being a pennant, not the flat bottom triangle like the others. But the 4 bottom development is there, and the 4th bottom shake-out was bigger - the biggest of the whole bull market thus far. And consequently, the following climb was the most massive yet:

Is all this 1,2,3, and shake-out, just in front of the monster climbs just a coincidence? Not at all likely. What are the odds? Technical analysis and fractal analysis measure all kinds of strange things in nature and the human heart. And I suppose it could well quantify what evil men do. Silver price manipulation over the years has been well documented, and I won't go into that here. But I think this repeating pattern may reflect a desire to suppress the silver price and separate as many ounces of silver from their owners as possible, just when other parties would like to buy.

Why does silver get this shake-out treatment while gold seems relatively unaffected? If you look at these four phase take-downs of the past and compare them with what gold was doing at the same time, you see that it is overwhelmingly a silver thing. Of course, silver is more volatile than gold, and any move down by the pair is more severe in silver. But there is a clear pattern of separation between gold and silver over the course of these consolidations, with silver progressively getting a more severe take-down than gold each time. The silver/gold ratio charts reveal this. For example, for the 2007 shake-out:

This ratio chart is not the flat bottom triangle pattern, but a more severe beating and a lower low each time until the big shake-out. By the time the shake-out happens, it is almost imperceptible on the gold chart. Why does gold get a pass on these consolidation-ending smack-downs?

By the end of a long bout of price suppression measures, could it be that the silver market is much more easily manipulated that the gold market? This was directly stated in an article from mid 2010 Silver Short Squeeze Could Be Imminent :

The silver market provides a window into what is happening in the gold market. Because the silver market is very small and its short position is so concentrated, its price is easier to manipulate than gold, but the same manipulation is taking place in gold on a much larger but less noticeable scale
PR Newswire (http://s.tt/1rCya)

And concerning the shake-out shown above of early February, 2010, the biggest of the bull market thus far, the article had this to say about the orchestration of that event:

On February 5th, we witnessed another sharp decline in silver prices...  The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire , who came out this week exposing the fraud that is taking place in the paper silver market. On February 3rd, Andrew Maguire wrote Eliud Ramirez , a senior investigator for the CFTC's Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th.

He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th. Andrew said that the takedown would happen regardless of if employment was better or worse than expected and the price of silver would be flushed to below $15 per ounce. During the next couple of days, silver was crushed ... to a low of $14.62 per ounce.PR Newswire (http://s.tt/1rCya)

So where are we now on the shake-out map?

We have formed our three bottoms and the flat bottom triangle. And we have the silver/gold separation of all the other shake-outs:

We have a bunch of cranky silver owners. We have everything but the shake-out. Nothing says the end of our present consolidation has to abide by the previous script. But if you are a holder of gold, and in particular silver, do not be surprised if we get this kind of move soon. And if you are looking to add to your exposure to silver, you may want to watch this pattern, because you don't want to buy in front it. It may resolve into the next major upleg without a shake-out, but if it happens, it will be a prime buy point.