Two for the road

I’m feeling a bit burned out writing about market timing as applied to modern portfolio theory and thought I’d divert my attentions to what’s happening in the here and now. In the course of chart surfing today, I came across a couple of  interesting stocks that deserve a mention. Consider this a palate-cleansing blog both for you and for me.

Two stocks on the warpath
The first stock that has been blazing an upward trail is small-cap Chinese wireless provider, KongZhong (Nasdaq: KONG). Its daily chart below shows that its been a juggernaut, moving steadily upwards since its 10/10/08 low at $2.31. It closed today at $7.63, up over 230% on more than six times normal volume.

kong-chart-5-14-091

Apparently, somebody knows something. Volume for the past month has, for the most part, been trouncing its normal volume of 95,000 shares. Previously, institutional ownership has been a neglible 0.20% of the float, but perhaps that’s changing. Could it be that someone besides the one analyst covering it is paying attention to the fact that the company has been steadily raising guidance over the past several quarters?

Note that the stock tends to bounce off its 30 dma (the blue line). Right now, it seems to be a bit overextended so if you want to play it, you might want to wait until it pulls back. Also note that if you look at KONG on a weekly chart you’ll see that it faces resistance at the major dollar levels of $8, $9, and $10.

The second is Diedrich Coffee (Nasdaq: DDRX). It was one of the coolest coffee haunts in the ten block commercial corrider near me (as well as the closest) that included one Peet’s, three Starbuck’s, one Coffee Bean and Tea Leaf, one Seattle’s Best (my favorite spot that ultimately morphed into a trendy baby clothing store), plus an independent gourmet espresso shoppe. Starbuck’s (SBUX) eventually bought out all of the Diedrich’s shops in the Southern California area including mine and finally had to shutter because it couldn’t compete with the other two SBUX’s that were within 100 yards of it.

So, I’m scratching my head looking at the chart below and wondering what is suddenly up with Diedrich’s. The company has been closing out its retail locations, including its Gloria Jean brand, and going the wholesale route. The stock chart looks like the 50-1 Kentucky Derby winner, Mine That Bean. Just two months ago it was trading at all of 38 cents, and today it closed at $12.56, only 3200% above that. Guess the insiders who bought near the stock low knew what they were doing–talk about winning the trifecta!

dietrich-coffee-monthly-chart-5-14-09

The company’s major competitors are Starbuck’s (SBUX), Peet’s (PEET), and Green Mountain Coffee Roasters (GMCR). Perhaps Diedrich’s management understood that real-estate was in a bubble and wisely sold out. I don’t know about that, but I do know that its stock chart is defying those of its competitors and is the only one trading at an all-time high. Can it keep up this pace? I’m not sure but it looks like somebody’s gobbling up the stock as it’s been trading well above its average daily volume of 120,000 shares for the past three weeks.

The stock may be ready for a breather as evidenced by today’s topping tail. Waiting for a pull-back before entering a long position wouldn’t be a bad thing, especially as the stock has enjoyed a huge run-up.

But I still want to know the inside scoop with this company. Something’s brewing, and it’s not just java.

Note:  Dr. Kris has no positions in any stocks, options, or ETFs expressed in her articles unless otherwise stated.  The exception is with her M&A  (MANDA) fund in which she does own shares as stated.

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