willisadair

UPC - Buy, Short, or Ignore?

Long
NASDAQ:UPC   Universe Pharmaceuticals Inc
So let's review $UPC, the Chinese Universe Pharmaceuticals Company that is a recent debut on the NYSE. Normally I wouldn't be interested in a small cap that is so new but UPC is kind of intriguing. UPC sells predominantly herbal and traditional medicines in China and is geared towards middle age and older consumers. Its expanse to the be the first of its kind in the US market and possible expansion into the US is a good long term value play. It debuted around 5.26 made a high of 5.72 and traded down to 4.34 on it's opening. Shorts have been having a field day on it and volatility hasn't been good for long minded traders at least during regular hours. It had an amazing break out a few days after its initial opening. It also opened up to the 12 dollar range before an epic breakdown over the next few days back to lows.

Normally I would say that it is was dead in the water but something interesting happened while it was down to the $3.75 range. On April 1st it had 35% gain in early trading. It raised $25 million in its initial IPO and then the broker, the bank, chose to exercise its right to purchase shares at an agreed upon price of $5. The broker bought 750,000 shares at $5 while it was still in the $3.75 range. Why would a broker purchase the shares at $3.75 million when they could have purchased them at a significant lower price level unless they thought it was going to go up considerably over their initial $5 dollar entry in the short term. Investorplace states it this way. "Indeed, any exercise of an over-allotment option is a strong signal to the market. However, an over-allotment option is just like an options contract individual investors can buy. When such an option is exercised that far out of the money, the individual exercising needs to be pretty darn sure they’re going to make up the difference in the near term."

You can look at the time frame analysis done on the 15 minute, 1 hour, 4 hour, and daily levels. I personally think this heading for a breakout in the near term. Initial targets are from 9.60 to 10.50 plus. Why this range? It would double the broker's investment. A break out to $25 to $50 would be the absolute highest but I wouldn't hold my breath for such a return in under a years time frame. I do believe if this caught shorts unaware that were unwilling to close their position it could go considerably higher but I am not a huge advocate of buy for "the squeeze". Could it happen? Sure, but I think investing on what the broker sees is likely a wise option.

I also like the Mac-D pattern is trending upward on the hourly time-frame and think that the stock has upward potential.

Not financial advice. For entertainment and educational purposes.

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