Hi Toms17; This situation has happened many times before, in...

Hi Toms17;

This situation has happened many times before, in fact Market Inefficiency/Peer Imbalance/Miss-evaluation/Bargains is part of the joy of Small Caps.

For Rational and mostly Irrational reasons the market gets the pricing wrong between comparable peers.

When the market wakes up out of their stupor, in cases where the undervalued small cap is right on the bottom of the basement, trust and long-termers are few and far between for the spec to become a miner.

Short-termers don't get much to play with and mid-termers take their profits with nervous fortitude dumping half their positions.

So what we see is the market attempts to re-evaluate but does not have enough numbers of investors to resist short sellers, bots and profit takers. The Re-evaluation 2 Step is actually a great thing for Long-termers. Accumulators buy on the pull backs all the way up because after a year or 2 it creates the largest amount of leverage even over people who invest in many companies. The maths of this is easy to confirm for yourself. Buy enough at 50c and sell enough at $1 and you will be happy.

In the First MRF wave we see it exhausting and failing and failing to small, pathetic short selling making the long-termers laugh. The market does not have enough people and so falls back to old safety levels. The next wave, if it is a Re-evaluation, will take less time then the first, if it takes longer then it may be a fake-out. As we see with MRF it has taken less time to re-attempt cracking .14 -

All the Re-evaluation 2 Step means is many Long-termers want to see the breakout of .14 first before starting their accumulation. Easy to buy the second wave breakout. So the numbers can lag and profit-takers and bots and short-sellers can drag. So 2 Steps forwards, one step back. In MRF's case I am uncertain because it has amazing news flow and an amazing and obvious Peer Imbalance. The rubber band between MRF and BBR is extreme right now and both are pulling on each other.

So like a dance the market Climbs, Stalls or Falls at decision levels especially. This can allow a certain predictive element to cross our minds. With these Small Caps history can show us many amazing connections, even over currencies and markets that appear unconnected.

When they break out they really break out.

While BBR languished at .28 struggling with .40 I predicted when it cracks that level it will attempt .70. When it cracked .40 it raced to .65 - Not bad for a prediction but there is allot of precedence for what these Small caps do when they are under-valued. When they crack a level they tend to go further then expected and further faster then larger caps; the analogy would be a speeding bullet is faster then a spear!

Small caps are highly desirable for long-termers and so they receive steady buying and selling, leveraging them higher and higher. (Uptrend/Downtrend/Accumulation/Distribution)

So here's my prediction for Smurf:

1/ If it does not do the Re-evaluation 2 Step and cracks .14 then it will bounce and slip up to the top end of a new range very similar to BBR, say .26 - .28

2/ If it cracks the .28 decision level by a good margin it will be looking at .40 and after that .70 and after that .90 just like its Peers. Why? Because Decision levels are part of the herds fundamental behavior. I could right a book about it.

Who Knows; being right about BBR does not mean I am right about MRF, I look at the Financials, the Management, the dirt, the kingmakers, the market and many other factors. I think the secret is taking advantage of hard work. All the information is now free to learn and keep learning online. For a while I ignored the basics and sound investment strategies thinking myself into knots. I made it hard for myself not using best practice and common sense.

For instance when I played Blackjack at the Casino I lost $50 dollars. I went away and found the best practice in every position and then won consistently enough to make it fun although the numbers still favored the House slightly without including card counting.

Learning the best practices and common sense strategies takes away the nerves and emotions of it all. When many people after the first wave up to .10 took half their profits and let the other ride. This was a Sound strategy. Value investing and accumulating are very powerful combinations. Learn how to calculate value, find it and accumulate it and allow the market to catch up also means the tax goes down, you are rewarded for making more money...

I am biased, I think it is about learning the basics and crawling before walking and even then it helps to have a hand to hold. Buffet is a great influence on my thinking and I read his works every year. I also look at financial statements for fun, boring right?

Toms17; you asked what happens if there is bad news. The market can only climb, stall or fall; trust in yourself and think for yourself and work hard. I don't believe in luck; I believe in Will. Speculation is risky and so your best defense is reason, knowledge and only risking what you can afford to lose with dignity.

As for risks there are a number like sovereign risk; I recommend giving the company a call about the risks, good Aussie companies like MRF will answer you because they run on the sniff of a oily rag. They will take the time for you, trust me Aussie companies are the best and most loved in the world. Many countries treat their shareholders like something they scraped off of their shoe.

Kind Regards

PS - DYOR !