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Wednesday, April 27, 2011

A Matter Of Perspective

We have all grown up hearing old adages like “a picture is worth 1000 words” or “beauty is in the eye of the beholder”. If you are an investor than adages like “sell in May and go away” or “bulls make money, bears make money, but pigs get slaughtered” will ring true. All these adages contain rudimentary but highly effective nuggets of wisdom. Adages can also color your thinking and allow you to be lulled in to sort of a go with the herd mentality, which can be a financially detrimental thing.

While the adages above and thousands more do help for the most part by imparting wisdom of prior generations of market participants who paid for these nuggets with market performance or lack thereof, it also can be good to change your perspective for validation. I am sure that many of you have seen the 2008 movie “Vantage Point”, starring Dennis Quaid, Forrest Whittaker and Mathew Fox, while not a cinematic masterpiece it does provide the idea of uncovering the truth from different “vantage points”. In the film the true plot is revealed by several different characters providing their perspective regarding an incident that has occurred. The movie is a good but not great watch; however, it does make you think of point of view and perception of reality.

To me the market is short term driven by perceptions and frame of reference while ultimately reality and fundamentals dictate the longer term. It is human nature to form an opinion based upon what you see, your bias, and perspective. If ten people witness a car accident and are later questioned by police several versions of what happened are likely to be told depending on the person’s point of view. When you look at stocks in the market you add an emotional factor as well as the “frame of reference” factor. Humans are emotional creatures and when you add something like money in to the equation many times the decisions made are not the best and can be counter intuitive.

I have worked very hard over the years to keep the emotional aspect out of my investing, but being human it is very difficult but not impossible to do so. As a result I have developed strict rules for my trading including position size limits and stop loss limits. I have the downside aspect of my investing covered as to respect Rule number 1 of investing which is to not loose principal and live to invest another day by using my rule set to prevent small mistakes from becoming huge ones. I do acknowledge that I struggle with the upside as being human I always worry that I have left money on the table, of course I have learned no one ever went broke by taking a profit.

In addition to my buy and sell rules I try to make sure that I am looking at things in a realistic manner and try and devise ways in which to look at various things through a different lens. One of the tools that I use to validate my perspective is a little game that I like to play which I call “buy it, hold it or fry it”. My investment style is to look at trends, evaluate the fundamentals and then use technical analysis to see good entry and or exit points

To play “Buy it, Hold it or Fry it” one has to take a stock chart and look at it blind meaning no stock name visible and no pricing, instead just the a plot of the price with 50 day and 200 day moving averages for a daily chart and price with 10 week and 50 week moving averages for on a monthly chart. Once you have the two charts look at them and ask yourself looking at the trend and or chart patterns would you buy this stock or sell it, remembering that you have already done the fundamental analysis.

Below is a daily chart for your review, would you buy or fry it?

And this chart is of the same stock but on a weekly basis.

The chart looks pretty good in both time frames doesn’t it? Well it does look like a pretty convincing double bottom and I am sure one would be tempted to buy it on a pullback. Looking at the chart in this manner gives you some perspective. Of course you may be wondering what stock does this chart represent, well first I want you to look at the next set of charts and play the same game.

The daily chart for the next stock

The weekly chart for the same issue.

I don’t know about you dear reader but this does not look like an issue I would like to buy although you could get a short covering bounce here. So you may be asking yourself what are the issues shown in the above charts? Well they are actually the same issue only the first two charts are inverted to make a point. The charts are the stock of the United States aka the Dollar. The point was that without knowing what the underlying issue is you are more open to interpreting the patterns.

I know there are many people calling for the Dollar to rally and based upon what I see in the above charts it had better move up to work its way out of the downtrend soon, but it appears that there is plenty resistance for the almighty Dollar to overcome. Additionally, those infamous “death crosses” abound on both time frames which is not a good omen to say the least. If the Dollar continues this decline key support on this chart going back 3 years is only a couple points below. A break in the key support could usher in a waterfall decline in the Dollar.

It is very worrisome that over the past couple months with all the turmoil in the world and financial markets that the dollar has relentlessly declined. It was not that long ago when something occurred and people wanted safety they ran to the Dollar even with all its flaws. This time around they are no longer seeking safe harbor in the Dollar but instead other assets like the Swiss Franc have benefited. Moreover, the precious metals have received inflows as a result and stocks have moved higher as well since it appears that investors want something of value to store their money in and due to FED policies most consider that cash is trash.

There is much talk in the media about the Dollar and even just yesterday Timmy “Turbo Tax” Geithner came out with a sound bite discussing a strong dollar policy is what he believes in as long as he holds the office of Treasurer. From the charts above you can clearly see that this is not the case and sound bites tell one story but the dollar is squealing like a pig to cop a turn of phrase from the movie Deliverance.

Much has been made about the Dollar and there are calls for a reversal because there is a lot of negativity surrounding the dollar, in fact the last figure I saw was on the order of 90% bears. While it is true that the dollar is “best house in a bad neighborhood” (choose your own metaphor: tallest midget, best of the worst, the best looking horse at the glue factory) but that will only carry you so far when the owner of the house and all the neighbors keep insisting on setting the neighborhood ablaze. The fact that negativity on the Dollar is through the roof yet it can’t even seem to get out of bed indicates to me that the problems that we as a country face are being recognized around the world and are probably even deeper than we suspect.

Today for the first time in the FED’s 98 year history the FED chairman held a press conference about 1.5 hours after the FOMC statement was released. Bernanke’s dog and pony with the press was cordial and he essentially said many words about nothing. The press asked questions and Ben did his usual dance around the actual answer routine. One thing that Bernanke did state that he would end the infamous QE2 on schedule, however, the language used about monitoring the situation leads one to believe that the back door has been left open for QE3. I hardly believe that they would call QE3 by that name, although a rose by any other name is still a rose. As Bernanke spoke the markets moved up and the precious metals roared to life.

It seems pretty obvious that the FED knows there is inflation but they also recognize that the recovery if you can call it that is still fragile. He went on to say that he was prepared to continue keeping rates down for an extended period of time. The markets took this to mean that the FED was not going to add more to the punchbowl but they were not necessarily taking it away either. It appears that the markets responded the way they did because there is a sense that inflation is here and is bound to get worse so the move from cash swung in to high gear.

There is a camp of people who believe that the FED is omniscient and they will be able to fix everything, but I do not fall in to that camp. I would contend that in this case due to the amount of stimulus, bailouts and low rates for unprecedentedly long periods of time there are still severe dislocations in the economy and a vast amount of unrealized pent up inflation. Bernanke, believes in his heart of hearts, that inflation is the “core rate” because food and energy prices are transitory. He may well be right but the question is what period of time is the transitory period and what is the driver? It appears that we are in the midst of the FED own vicious feedback loop. Between the spending in Washington and the FEDs policies it is little wonder that the Dollar is taking a hit.

The monetary and fiscal policies that were initiated under President Bush and vastly expanded under President Obama planted the seeds for what we are beginning to sow today. Under normal circumstances it takes 6 to 9 months for FED policy adjustments to filter through to the economy, but these are not normal times. All the policies that have been put into place are now starting create inflationary pressures and drive the dollar down which in turn adds to those pressures. In other words the monetary policy has achieved critical mass no different than a nuclear chain reaction and it cannot be turned back at least not without devastating after effects. Besides, neither the FED nor politicians have the stomach to implement measures to actually heal the economy nor do either want to take a chance of doing anything given that we are entering the Presidential election cycle. The FED and Washington have essentially painted themselves in to a corner concerning inflation and there is no one with the spine of a Paul Volcker to actually implement a fix.

Bernanke stood in front of the TV cameras and trotted out the tired idea that the FED could implement an exit strategy. The market was not buying it obviously since it rallied instead of selling off. I think the market sees things clearly just like the movie Sophie’s Choice where the mother has to make a choice of which of her children to allow to be taken to the concentration camp during WWII so does Bernanke. “Bernanke’s Choice” is to sacrifice the bond market or sacrifice the Dollar. It would appear the market participants understand Bernanke has already made up his mind. If Bernanke were to raise interest rates then regardless of what he claims about selling bonds to reduce liquidity the FED would have to take a hit on their balance sheet, since bond prices are inversely proportional to interest rates. Since the FED tends to protect the banks and itself, it is apparent that Bernanke will sacrifice the Dollar.

As far as our leadership in Washington coming to an agreement that would actually remedy the current situation I believe we will be lucky to get enough of a compromise just to keep things rolling along. Remember we are currently at the beginning of the election season and congress's main objective is to get re-elected and cutting granny's medicare, dad's social security or the military would not go over well at the polls regardless of what people say in opinion polls. The congress does not know how to cut spending and it will have to be forced upon them, but that could still take a while. Look at the last big budget compromise that received the same treatemnt in the media as the Roayl Wedding is currently. The congress argued back and forth and finally agreed to cut $38 Billion and it only took 8 days. Of course in that 8 day the government spent $70 or so Billion more. To pour salt on to that would the CBO (Congressional Budget Office) scored the bill and showed that any savings were greatly exagerrated. Of course now the focus is on raising the debt ceiling which they will do and send yet another signal to the world at large that our fiscal house is no where near any semblance of order or discipline.

I could continue but the bottom line is that not much has really changed from an investment perspective in my opinion. The Dollar will continue its southward trek, and inflation will continue to heat up. One should invest in “things” as the prices for commodities, precious metals and other inflation hedges will do well going forward. There will also be many stocks that will rise at least in nominal value. One could park money in the market but it has to be in companies that either benefit or are not impacted by inflation, like biotech or some tech companies as well as producers of commodities. Other areas to look at are companies with pricing power and those that pay and continually raise dividends.

In this environment I believe a great alternative is still the anti-Dollar (or anti-currency) aka Gold and Silver as they should perform very well in this environment. Moreover, I believe the metals can continue to make gains and we will look back at these price levels and realize that they were fairly priced not expensive as most feel. The reality is if the Dollar and other FIAT currencies are being depreciated then it is not so much that precious metals are rising but instead currencies are falling. There are many that have trotted out charts and theories regarding precious metals prices but as I said before this is not your father’s market and we are in uncharted waters so the old rules may not work any longer.

The precious metals will experience more corrections along the way as the rise particularly in silver is steep, but I believe that it is playing catch up after years of abuse. Silver is known as the poor man’s gold and also a smaller market than gold. The mass affordability of silver has created an influx of new money and is driving the price as it cannot absorb the funds as easily as its fairer brother gold. In full disclosure I did take advantage of the price drops and added more precious metals. I also believe we are rapidly approaching the point in time where the mining shares are getting ready to outperform the metal, as the two flip flop leadership in the sector.

Last week I penned a missive about Silver Wheaton (NYSE: SLW) and I believe that issue has now made the turn and should begin the process of moving higher. The volume on the downside shook out the weak hands and SLW spent time below its 50 Day moving average, but it has rebounded on strong volume today to close above the 50 day. Additionally, SLW was heavily oversold and the stochastics began to turn up, so it looks like the correction in SLW has run its course. There is a chance of some backing and filling here, but the worst is over for SLW in my opinion thanks to Bernanke.

Wednesday, April 13, 2011

PUDA The Magic Dragon ...and CEF Too

Many of you know the Peter, Paul and Mary song “Puff the magic dragon” which is what the title of my article plays off. What you may not know is that there was as a sequel after the 1978 animated version called “Puff in the land of the living lies” also with Burgess Meredith as the voice of Puff. I wanted to use the land of the living lies as the title but I thought people would not get it as it is not nearly as well known. Right now it does seem as if China at least from a stock perspective is the land of living lies.

In today’s missive I want to address last week’s article regarding Puda Coal (AMEX : PUDA). I received a couple comments telling me that I should rescind my article particularly since I caused people to invest in PUDA and lose potentially 25% on their money in one day, as I released my article one day before Alfred Little posted his expose. As an advisor and a writer you are going to cover many issues and will pull data from many sources. As for PUDA, on paper it looked like a wonderful company that produces real products namely coking or “met” coal for the Chinese market and earned real money doing so. Instead, the case surrounding PUDA is more complicated than just plain cooking the books as it involves the CEO essentially stealing the whole company and illegally selling it to another group of investors. Truth is stranger than fiction and you can’t make this crap up!

I found my information in publicly available documents and used it to determine if PUDA met my criteria for a sound investment. PUDA being listed on the NASDAQ is not some little pump and dump bulletin board stock that boiler rooms hustle on the telephone, but supposedly was subject to GAAP accounting and auditing in order to be listed. Sure PUDA is a small cap stock at the time with a market capitalization north of $300 Million, but hardly a “shoestring” operation. Additionally, PUDA was selected by the Chinese government to be one of the sanctioned coal consolidators lending more credibility to the company.

I along with many other advisors and newsletter writers got this wrong not because we could not see some blatant flaw in PUDA but instead because we had faith and trust in the system that the auditors and the system were doing their jobs. How come no one is out asking the question “where were the auditors in all this?”. Is Moore Stephens liable in this disaster? While Alfred Little with the help of Geoinvesting.com were able to get documents that showed this fraud, that no one else, not any of the investment houses or even famous short sellers like David Einhorn or Jim Chanos had an inkling even existed. I believe that based on Little’s history of exclusively targeting Chinese companies he has been able to uncover things that others without boots on the ground there ever could.

The past couple scandals have definitely left a bad taste in most investors mouths and the back lash is that other Chinese issues will suffer at least until confidence can be restored in Chinese stocks. I must say that If I were the former CEO of PUDA I would be a bit nervous as the Chinese have ways of dealing with these things especially if they feel it has caused the nation to lose face.

The former CEO could face punishment far worse than all the unsuspecting investors in PUDA, he won’t just lose his money but the Chinese have been known to execute people for these types of offenses. There are many examples of China taking bold action in these corruption cases, like the July execution of Zheng Xiaoyu. Xiaoyu, The former head of the State Food and Drug Administration, was put to death shortly after the country’s Supreme Court rejected his final appeal in cases related to lead paint on children’s toys exported around the world.

Xaioyu’s execution was on the most recent one I can recall but if you Google “china executes corrupt officials” you can read various articles on this topic. So far China has not addressed this situation but if I were a gambling man I would bet that China wants its companies to have access to the capital markets and that requires that their listed firms be trusted. So all you Chinese CEOs out there perpetrating fraud you better clean up your act or I suspect President Hu’s government will do it for you.

It is an analyst’s job to look at the company, check the numbers, evaluate prospects and weigh them against the macro environment to determine if the company and its security are a good deal. The industry and individual investors rely on the various exchanges, SEC and auditors to ensure that companies are reporting numbers accurately in order to be listed. Yes, there are times where you can look at the numbers and see that they don’t make sense or indicate hidden weakness or strength, but one expects the numbers to be at least “certified” by auditors. PUDA’s numbers did not indicate any problems in fact the story read very well but not beyond reason.

The bottom line here is that if we cannot trust the exchanges, SEC or auditors to enforce standards for reporting and pick up on fraud then how can we trust the market in general and would not every issue be suspect. Fortunately, these types of problems have been few and far between although several have cropped up in Chinese companies, which means either the entities in charge of the oversight process are not doing their jobs at least not well or the Chinese corporate leadership is not as sophisticated as their Western counterparts, yet. Still the number of problem issues is small on a percentage basis out of the thousands of stocks listed, unless you end up being a bag holder, in which case the statistics don’t matter.

Also people that read my article they should not have been investing in PUDA at the time based upon my recommendation. In the chart attached to the prior article one could see that PUDA had been in a down trend for a while and violated its uptrend line many days before Mr. Little released his report. The downtrend was occurring even while other coal stocks were headed north which should have acted as a separate warning flag even though fraud accusations were still weeks away. I clearly stated that PUDA had violated its long term uptrend line and was now targeting the $5 range which it may have gotten to if the issue had not been halted. I also stated that I would not be taking a position in PUDA unless it either dropped to the $5 level or resumed its uptrend and passed the $14.50 level. In some respects I wish that I would have gone short or bought puts but those that did ended up with a different problem. Since PUDA was halted and has not yet reopened all the players in the issue are essentially frozen until the stock is reopened for trading, assuming that happens. If the issue never reopens then the shorts make 100% and the longs loose 100% on their investment (although longs may benefit from class action suits). The options players have different issues to contend with but I am not going to delve into every complexity associated with this situation.

This experience has confirmed for me that it is critical especially in today’s market to have rules and discipline when investing. You cannot protect yourself from every misstep as it is the nature of the investing beast. You will on occasion be wrong or blindsided no matter how many precautions you take. This also validated for me that the use of fundamentals and technical analysis together help stack the deck more in your favor. As I stated before, the numbers painted one picture while the charts were providing a warning that all was not as it seemed.

In general there are two camps of people in the market at least among those that try and do their due diligence. The first party believes that the charts tell all and the second that ignore the charts and use only the numbers. The PUDA fiasco has unequivocally proven to me that one needs to be adept at both technical and fundamental analysis. Many of you out there believe that technical analysis is akin to reading tea leaves or divining prophecy by looking at animal entrails, but it saved my butt as I was long PUDA until the uptrend was violated.

My only regret from this situation was that I did not write the article earlier to hopefully help people get out before the revelation of wrong doing. I know there are many investors out there who are suffering as a result of the avarice of a few and I can completely sympathize as I have had my share of losses over the years. As bad as the losses feel right now take the time to evealuate what happened and learn from it. Some people will develop trading rules as a result while others will learn to use stops or position limits. It is events like this that make us all better investors because we learn form the situations. As painful and costly as this lesson has been for many it is the price of admission to learning successful market navigation. Don’t let anyone kid you every investor no matter how big or small has experienced losses like some of you have, anyone who says they have not is plain and simple a liar. Mr. Market is a fickle and unsympathetic creature and situations like PUDA show you the true negative side of investing. Remember like the old saying goes “this too shall pass” and you will recover and be stronger and much wiser than before.

Well now that I got that off my chest I wanted to mention something completely different regarding the precious metals space. A while back I had written an article entitled “Gold doesn’t have to weigh a ton” and I had mentioned some different ways to invest in the metals. At the moment there are many things interacting in the economy and market that are affecting the precious metals space like the end of QE 2, however, it appears to me that the precious metals want to push higher. In fact I had planned this week’s article to address the economy and the end of QE2’s impact, but dealing with PUDA obviously took precedence.

The long story short is that if you believe that precious metals are consolidating at higher levels and getting ready for another leg up you might want to participate. Right now I see an opportunity to gain exposure to bullion at the best price possible. The most cost effective method is to buy the Central Fund Of Canada (NYSE: CEF), which is a closed end fund not an ETF.

CEF recently completed an accretive shelf offering and that caused the premium on the shares to virtually evaporate. When I wrote the prior precious metals article mentioned above the premium on CEF, which is a proxy for buying vaulted gold and silver bullion outside the US was running at 5%, roughly comparable to buying the metals for your home safe.

The premium on CEF at the close today was only 3 tenths of 1 percent over spot and the day before the premium was literally at zero. You can’t buy bullion anywhere for that and if the metals continue up the premium will reflect the stronger demand for the shares but right now you are getting the shares for the same price a dealer would buy the precious metals from you. Additionally, the constant drum beat of the precious metal bubble crowd gets louder and louder. You have to ask yourself where were these people during the NASDAQ bubble, the credit bubble and the housing bubble? Since most investors have been taught for a variety of reasons not to like or understand the function of precious metals they can easily spot a bubble because they would not participate in the market in the first place, at least not yet!

Thursday, April 7, 2011

When Bad Things Happen To Good Stocks

By now virtually every investor has heard about the fraudulent Chinese companies that are listed on the various exchanges. As these companies have been identified they along with their investors have been taken behind the woodshed and just like “Old Yeller” mortally wounded. It does not help that we currently are operating in some of the most tumultuous times the world has ever known; truly all we would need to do is throw in a world war (God forbid) and it would this would be indisputable.

Given the frequency of events taking place around the world investor’s psyches have been damaged to a point where logic and reason are tossed out the window. News or information that used to take hours, days, weeks or even months to flow around the world now is disseminated to the masses in nanoseconds. While the speed of news flow is great for news junkies and talk show hosts it does make for irrational markets where no thought is given to a particular action but instead just the reaction of fear and or greed guides investment decisions. Time is not taken to investigate the true implications of the event, instead we live in shoot first ask questions later investment environment.

The current Chinese stock scandals have tainted virtually all Chinese stocks less than a certain market cap with the same brush whether deserved or not. Take for example one of my long time holdings Silvercorp Minerals (NYSE: SVM), with its market cap over $2 billion it has been unaffected by the Chinese fraud, of course it helps that it is in the precious metals space which is currently very strong. The flip side of this is Puda Coal (AMEX: PUDA) which for all intents and purposes is a solid company that happens to operate in China and is also in the coal space which has been very strong as well. Puda is in the wrong place at the right time in otherwords guilty by association not reality. Puda provides cleaned coking coal to steel manufacturers and currently has a capacity to “wash” around 4 million metric tons of coal.

Given China’s rapid growth and plans to continue particularly in infrastructure growth for the foreseeable future Puda’s products will remain in demand. The amount of steel required for China’s continual build out demands ever increasing amounts of coking or sometimes refered to as “met” coal, which is what Puda sells. The actual statistics of Puda coal would be enviable by many companies having 51% revenue growth year over year and a trailing PE of 8.5. The forward PE is a ridiculous 2.38. Puda’s price to sales ratio is a paltry .91 and price to book while not a Ben Graham’s “margin of safety” stands at a 1.17, which is very low for this market. Puda had $324 million in revenue over the last year roughly equating to $16.15 per share and earnings EBITDA of $35.9 million which gives the company a fully diluted EPS of 1.15 per share. If you calculate Puda’s earnings yield (Annual EPS\PE) you get a 13.5% earnings yield versus “risk free” US Treasury bonds whose rate is 4.58% for the 30 year as of this writing, indicating the stock is inexpensive. Moreover, if projections are correct and Puda meets the low end of analyst estimates for earnings next year at $1.44 per share and the forward PE is maintained at 2.38 the earnings yield would skyrocket to 60%. Additionally, Puda is a company that is growing generating year over year earnings growth in the neighborhood of 95%.

Puda looks strong from a debt perspective as well. They have total cash on hand of $156 million vs a total debt of $52 million giving them a low debt to equity ratio of 14.5%. Puda is well positioned to cover their debt with a current ratio of 3.26. The kicker here is that the company currently has $5.20 of cash on hand per share which, I am sure is reflective of the shelf offering they did back in December 2010, giving them a nice war chest. Puda is also in a unique position as they are one of the selected companies by their home government of China to be a mining consolidator. China is trying to get a handle on both the fragmentation of its mine supply as well as dealing with is environmental problems. As a result the Chinese government has granted certain companies the ability to become consolidators and take over this “hodge podge” of small and some family operated mines. The mines being taken over really have no choice as the government has declared that this is what will happen. The net result is Puda will be able to grow its portfolio and increase reserves at a reasonable cost providing organic growth for the company and better more stable supply for China. To me this factor makes Puda a winner in the long run.

Even with all that Puda has going for it has been lumped in to the specter of these Chinese companies that were either shell companies or cooking their books. It is not fair that this has occurred to a quality company like Puda nor is it fair that it will probably remain a stigma for some time. Even a recent investor conference that highlighted Puda and their potential was not able to lift the dark storm clouds from the shares. Yesterday the shares in all coal companies took a hit but Puda was beaten bady. To give you an analogy Puda was like the brother in law in the ”Godfather 1” where Sonny discovers that his sister had been abused again. Sonny tracks down the brother in law and beats him right on the street in broad daylight. He beat the guy senseless with his fists and then kicks him; for good measure he even takes the lids from the old steel garbage cans on the street and whacks him with those too. If you can envision that scene then you understand the drubbing Puda took yesterday.

Reading the various message boards there are many calling this the bottom in Puda especially since the reaction low of $9.60 was not violated even on such heavy volume. I am not sure that I subscribe to that point of view as Puda has been in a downtrend and distributed along the way. While Puda could bounce here as nothing goes straight up or down at least not in the stock market where the laws of physics are often suspended, I believe that there is further downside due to sentiment. On a weekly chart you can see that the long term uptrend dating back to March 09 has been clearly violated on high volume and would have to rally back above roughly $14.50 and hold to reinstate that trend and the break out level for that trend line is roughly $5. At this time it appears more to me like Puda is targeting the $5 area regardless of how good the stock is fundamentally.

In the long run fundamentals win out but as Keyenes once said, “in the long run we are all dead” so trying to guess a bottom here or holding on for Puda to recover is not a good strategy. Even on a daily chart you can see Puda has been in a downtrend and has formed a “Triangle”. Usually triangles tend to resolve in the direction from which they were entered, which in this case was up. The triangle that has formed for Puda appears to have resolved to the downside. I have included both charts below so you can make up your own mind.

The bottom line here is that while I love Puda and the concept of the stock I am not married to the issue. I think Puda has great potential but I would not go long until the uptrend is restored and that means either time or a steady grind back to $14.50 or so. Even at $14.50 Puda stands to return huge profits to investors as it will still be very cheap. Conversely, one could go short or use puts to capture the downside which seems like the stronger bet at the moment. Any bounces here would be good short entry points, however, keep your mental stops reasonable as anything can happen especially in the current market environment. I am looking for a move down to the $6 level possibly lower toward $5 if market conditions and sentiment are true to form. As I said if the stock either drops to the level specified or rises to the $14.50 level I would be a buyer as the risk is lessened in either scenario in my opinion.