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Local.com - trend reversal alert!

I love this chart!

Just take a look at this. What a well-defined downward trend we've had for over a month now. And look how clear the upside breakout appears to be.

LOCM, Sept 8, 2009
The stock in question here is Local.com (LOCM) and it showed up tonight on our Trend Busters list. The stock opened on Tuesday very strong but was unable to hold onto all its gains; nevertheless, it ended up with a nearly 2% gain on the day.

Also notable is the rising 50-day moving average. The stock just touched the 50-DMA and strongly bounced up. This is another positive sign.

Background --

The company's claim to fame is embodied in its name. Local.com specializes in local search and provides detailed relevant search results for local business, products and services, and sponsored listings. There are some observers of the Internet who feel that this kind of localization of search and advertising is the next big frontier and that Local.com is a pioneer.

Being on the cutting edge, however, often means that profits are lacking. It's no different for Local.com. The company is somewhat of a financial basket case. It's PE is meaningless, it isn't cash flow positive, it doesn't even have positive EBITDA.

On the other hand, quarterly revenue growth y-o-y is 42% and there is no debt. This is the classic start-up struggling to get to profitability. They've got a great idea, they've staked their claim on a portion of the Internet, they're growing but they haven't quite proven themselves.

In any case, the chart looks like a classic trend reversal so you can't ignore this stock. And the company has been talked about as a take-over candidate. This is not a value stock and it's not for the faint of heart but it sure looks like a good pick for a swing trader.

Disclosure: no positions

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