GMX Resources, Inc. (GMXR)

jachello (98.13) Submitted: 6/29/2008 10:35:02 PM : Start Price: $73.75 GMXR Score: +52.02

Can you say frothy? The talking heads are already saying energy may be in a bubble. Wall street wants and needs a correction to feel better about the surge in energy stocks. They want to get this correction behind them so they can throw more money into a good long term growth trend.

So why am I cherry picking GMXR for a short call? Well because it's throwing off so many ugly signals I can't stop myself from stepping in front of this run away train. Yes, I realize timing short calls is nearly impossible, but what the hay!

Let me count the ways this thing smacks of ugly.... Insiders are selling in large blocks (back in the 40s and 50s, it's now in the 70s). If you take book value and look at 5 yr growth and earnings projections I get a DCF + book of $27 (10% growth on $2 earnings) + $12.5 = 39.5. Curiously correlated with when the insiders sold. Because I know I'm stepping in front of a momentum train, I took at look at RSI to see if this sucker is on the high end (overbought). It's currently at 67 (crossing above and then back below 70 is usually the trigger for a sell) and was just a few days ago at 81.

So we got fundamentals and momentum starting to look like a fall scenario is brewing. How about the anecdotal smell test? Yep wall street wants a correction. Yep smaller stocks generally get smacked hardest. Yep I like my chances.... at least for a few months. If we get through hurricane season without devastation and geopolitics don't skew things, I really like my chances.