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2013's Summer Surprise Runaway Stock

08/23/13 05:15:30 PM
by Billy Williams

Mobile technology is booming and one company is keeping your personal information safe from cyber-predators, making its stock soar.

Security:   NQ
Position:   Hold

Just over 20 years ago, mobile phones were about the size of a cement block and could cost the user as much as $6 a minute depending on where they were calling. Flash forward to 2013, cell phones have evolved into miniature computers that can do seemingly everything: text a friend vacationing in South Africa, play video games with a friend in Vancouver, download music, check the price of copper in Dubai, post pictures on Facebook, and stream videos from Netflix. These breakthroughs in technology are inspiring as people can now connect and communicate all over the world, something many of us couldn't even begin to fathom just a few years ago. But, sadly, there are a new set of problems that come with it.

Wireless internet is overrun with cyber-security problems as computer hackers can gain access to your personal information through sophisticated trojan programs as well as take your credit card information stored on your phone and records. Hackers can do everything from piggy back on your email transmissions to plant viruses to destroy your phone's operating system.

Figure 1. NQ went public in 2011 and then traded back and forth for a couple of years. The IPO was unremarkable and the stock stayed off Wall Street's radar up until recently.
Graphic provided by:
But, NQ Mobile Inc. (NQ), based out of China, is an upcoming company leading the way in providing mobile Internet services in the areas of mobile security, privacy, productivity, personalized cloud, and family protection. NQ is a a mobile security product that protects user's mobile voice and data from malicious software, data theft, and privacy intrusion.

The company went public in 2011 and has made stellar gains on the back of several months of continuous triple-digit sales growth and gaining strategic partnerships to provide security to mobile phone devices.

A small cap company that has just under $1 billion market cap, NQ has $128 million in cash and 51.8 million in outstanding shares. Also, the company has less than half its shares under institutional sponsorship which means that it could experience more accumulation of its share by the bigger players on Wall Street.

Figure 2. NQ broke out higher out of a double bottom formation on July 16, 2013, and gained almost 100% before pulling back. The stock has reported incredible sales figures in a series of triple digit gains that could push the stock even higher. However, there are some key factors that you need to know about NQ before taking a position.
Graphic provided by:
Why is that important? First, you can notice by its price charts that the stock's price traded back and forth for a period of years after its IPO before breaking out from a double bottom formation on July 16, 2013, trading up through its buy point of $10 on greater volume. Since then, the stock doubled in less than a month before pulling back slightly.

Any stock that appreciates 20% or more in less than eight weeks should be held longer and stop loss points should be adjusted to protect your gains along with your downside.

While the stock may be 2013's summer surprise winner, it doesn't pay to chase this stock's performance. For now, the smart play is to sit tight and wait to see how the stock holds up near its all-time high while experiencing downward pressure from a market that is in a correction.

Also, the stock's price is almost twice that of it's 200-day SMA. Price that extended from its 200-day SMA will usually wait for the moving average to catch up to it or the stock will pullback, one or the other, or meet somewhere in between.

Now, regarding NQ's outstanding shares, if the stock continues to hold near its highs and gain the attention of the institutional investors, then you could see shares increase in value as NQ gains sponsorship.

Wait for it to trade up through $20 on greater volume as the big investors take larger positions and/or wait for the market to break higher and ride the momentum on the next surge to higher prices.

Billy Williams

Billy Williams has been trading the markets for 27 years, specializing in momentum trading with stocks and options.

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