Monday, May 31, 2010

I think I have unearthed another gem in this weak market...

DDIC fits all of my criteria perfectly. On Friday, when the indexes closed down, DDIC closed up over 7% on above average 50 day volume. It reported outstanding earnings numbers late last month. EPS was up 533% YoY on 65% revenue growth YoY. The volume for the week it announced earnings was the highest in the stock's history. It is also interesting to note that this was likely DDIC's first earnings acceleration in the stock's lifetime and that it is currently forming a stage 2 base after breaking out of a stage 1 base in late February. It floats less than 20 Mil shares and has a market cap under 200 Mil. Analyst coverage seemed to have been initiated or possible re-initiated for the first time last quarter. Its 3, 6 and 12 month relative price strength are all above 90 and it is in a strong group along side names like SANM. 5.4% of the float was held short as of May 14th 2009 and 40% of shares are held by insiders. Analyst estimates for earnings for the next quarter have drifted slightly lower but estimates for the full year and next year have risen sharply. When DDIC's fundamentals are stacked against former monster stocks it seems it has a high probability of moving significantly should the market indexes turn higher.

It is currently trading above both its 20 day and 50 day moving averages and never closed lower than 20% off its 52-week high through out the recent correction. After running up on massive volume during the previous up trend in the indexes, DDIC pulled back with volume on down days never rising above average. It is now working on the right side of a short base pattern with most recent up day coming on above average volume. Its base is not complete and the market indexes have not yet lodged a follow through day. So it is not currently buy-able. However, it is certainly worthy of addition to any watch list!

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