What do Joe's Jeans Inc. (NASDAQ:JOEZ) and NQ Mobile Inc. (NYSE:NQ) have in common? Well, nothing ... at least on the surface. JOEZ is, as the name would imply, a denim company, while NQ, as the name would vaguely suggest, a mobile internet service provider. There is one common element between the two companies right now, however, at least in my eyes ... both are likely to be at the beginning of major (read "trade-worthy") bounces.
For NQ, the setup stems from a harsh drubbing shares suffered last week, falling from $22.88 to a low of $8.46 in just one day on the heels of a "hit piece" article that called NQ Mobile a fraud. As is so often the case, the market sold first and asked questions later, pulling the stock down to about a third of its prior value in a matter of minutes.
Now that the dust is settling, the healing can begin. And it is. NQ Mobile Inc. shares are now back to $13.65, having crossed back above the 200-day moving average line (green), and still moving higher at a steady pace. At least part of that rebound was fueled by a verification of the deposit that had been called into question by the original bearish article.
Is NQ a fraud? Maybe, or maybe not, but it should be noted that the source for the warning was a website that exists solely to point out fraud, yet rarely proves any fraud actually exists - they're all just allegations, most of which go away (fall off the radar) within a matter of weeks. There's more upside potential than downside risk left from here.
As for Joe's Jeans Inc., it wasn't the victim of hit-piece "journalism", but it's still been under fire for a while. Shares of JOEZ have fallen from a peak of $2.04 in April to a low of $1.02 hit in September, and then hit again this month. Though subtle, the fact that the stock didn't make a lower low last month loosely suggests the bulls have drawn a line in the sand at $1.02. Even without the double-bottom, however, you can visually tell the chart's pullback has slowed, and that the bulls are testing the waters. The 20-day line is close to crossing back above the 50-day moving average line (blue and purple, respectively), and Joe's Jeans shares themselves are close to crossing back above both ... close enough on both fronts to merit slipping into this jeans stock now.
The pullback from JOEZ was largely driven by concerns about a sales and earnings slump, though that's nothing new for this small company. As has often been the case with that the market's hot and cold opinion of Joe's Jeans Inc., the sellers overdid it. The 'play' here is an unwinding of the overzealous effort, which could get the stock back to the $1.60-$1.80 range.
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