Big Gains from TINY?

12/30/2005 12:00 am EST


Jocelynn Drake

Financial Analyst, Schaeffer's Investment Research

"By using our Schaeffer's Equity Scorecard rating system, we are able to scan for specific bullish and bearish trading opportunities," says Jocelynn Drake. Here, her screening leads to "TINY" opportunity with potential in the emerging field of nanotechnology.

"Harris & Harris Group (TINY NASDAQ) earns a strong 8.5 rating on a scale of 1 to 10. Harris & Harris invests mostly in start-up firms developing so-called ‘tiny' technology--microsystems, micro-electromechanical systems, and nanotechnology. The company identifies small, thinly-capitalized firms lacking operating history or experienced management. It invests in those firms and provides assistance such as management and product development. Its portfolio consists of about 20 companies.

"The security has rallied higher since early November, breaking above former resistance at the 11.20 level as it climbs along the support of its 20-day moving average. The stock is currently consolidating into intermediate-term support at its ascending ten-week trendline. From a longer-term perspective, the equity has also broken above resistance at its ten-month and 20-month moving averages, which could now serve as support.

"Meanwhile, traders remain pessimistic toward the shares. In options trading, we are seeing speculators show more pessimism now compared to the stock's option configuration during the past year. The equity's Schaeffer's put/call open interest ratio rests at 0.55, which is higher than 94% of all those taken during the past 52 weeks. In other words, options traders have been more bearishly configured toward TINY only 6% of the time during the past 12 months.

"One favorite stock trading strategy when it comes to TINY remains short selling. This is when an investor borrows shares of an equity and sells them with the expectation that he/she will later by the shares back at a lower price. While the number of shorted TINY shares decreased by 2% in November, the 1.5 million shorted shares still represent nearly 8% of the security's float.

"What's more, it would take nine days to buy back these bearish bets at the security's average daily trading volume. A short-squeeze situation could result in a sharp rally in the stock. Meanwhile, Wall Street has yet to stumble across this equity, as only three analysts currently offer a rating on the security. Any new coverage of the stock could help to boost the security higher."

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