August 31, 2007
What's Behind Superconductor Tech's Momentum?

By Ant & Sons

Superconductor Technologies Inc. (SCON), an infrastructure products provider for wireless voice and data is the latest momentum play to hit the Street. It seems that there haven't been too many small caps moving lately, or maybe it just seems that way since volatility has created great swings and trade opportunities in a lot of blue chip big cap names. Nonetheless, Superconductor has been given the nod, jump-started by a vote of confidence by China-based Hunchun BaoLi Communication Co.'s purchase of $15 million worth of company shares, or 9.2 million shares of Superconductor stock at $1.63. That was at a discount compared to the previous day's close of $2.11.

Those shares are looking extremely cheap right now after a steady run up that was sparked again Monday when Superconductor announced plans to joint venture with Hunchun by the end of 2007. According to Forbes, Ferris, Baker Watts analyst Matthew Robison opines that bigger players like Andrew Corp. and Powerwave have largely stayed away from Superconductor technology. So, obviously a strategic partner with access to a huge market is a big catch. But the lack of specifics, and numbers will damper the euphoria - as with all momentum stocks, it's just a matter of when.

Then, let's look at some of the price and volume action. Total shares traded on Monday were 12.8 million (the entire float) in a session that saw the stock double on a gap up before flattening, and seeing some distribution. After holding steady on Tuesday, the rally continued on Wednesday with the stock up 31%, and breaking out over Monday's high of $6.70 on volume that was equally as heavy. On Wednesday it based after climbing higher that morning on a couple of spikes in volume, but it rolled over late that day. After having quite the run up from last week's lows of $1.48, the stock is vulnerable to short sellers, and profit takers who are waiting for an entry/exit. Thus, any perceived weakness will be sold into and reverse the momentum, particularly a break lower near $7.00 and $6.70.

SCON 1-yr chart:



(Source: SeekingAlpha)