Nick wanted me to take a look at ELSE. When I first pulled up the chart it was on a chart with an arithmetic scale and it looked horrible. It looks a bit better on a logarithmic scale (which I normally use) but I still think it’s pulled back too far. There are a lot of trapped, underwater bulls that should now be overhead resistance. The stock needs to almost double for all those folks to get back to break-even. Doubling may have been a simple thing two weeks ago but this market’s gotten a whole lot tougher.
Having said that, the stock is extremely volatile and is deeply oversold. It could easily bounce a point or more from here in the short term. But longer term I don’t like it unless it shows some renewed strength and can close over the downward sloping trendline.
Aside from the chart, I have concerns about the stock. Apparently its huge move was caused by it being picked up as an ethanol play (seems like a stretch to me). And like ‘real’ ethanol companies like PEIX, insiders/large shareholders have been dumping stock. Here are two notes from Briefing since April 27th (they wasted no time in dumping their shares!):
27-Apr-06 13:59 ET– Electro-Sensors 10% Holder sells 140K shares at $6.18-6.96 (ELSE) 8.50 +0.10
03-May-06 08:20 ET- Electro-Sensors: Daniel Zeff discloses 0% stake in ELSE, down from 8.1% stake disclosed on 4/26 (ELSE) 9.97 : On 4/26, Daniel Zeff disclosed ownership of 263K shares, or 8.1%.
One final thing to be aware of is that ELSE is paying a special $1/share dividend on Friday. That should cause the stock to drop a dollar.
So to sum it all up, if I had my own TV show I’d be banging the “don’t buy” button.
