On several of the message boards I’m following, I’ve heard numerous complaints about stock manipulation, particularly naked shorting of stocks by hedge funds and their ilk.

Not only is this practice illegal, it tends to be done mostly by the big guys leaving us smaller retail investors holding the bags. The SEC discusses it here. The NASDAQ has details about it at nasdaqtrader.com. A public awareness site with lots of information can be found at thesanitycheck.com.

To make the SHO list, a stock has to have at least 0.5% of sales flagged as Failed To Deliver (FTD) for five consecutive days. It stays on the list until the number drops below the threshhold.

I did a lookup on the SHO List for a few stocks I’m following. Since it takes three days before the shares are declared FTD (Failure To Deliver) and five consecutive days to get on the list, I backdated the initial date in each case.

For Smith Micro (SMSI), I discovered that it has been on the list since 2005 (when they started reporting I guess) three times.

Here are the details:

2005Mar31 Open: 5.36

2005May04 Close: 4.21

Change in stock price: -21.5%

This is one of the shortest times on the SHO for all stocks I’m watching and it roughly coincided with a positive earnings report. The stock didn’t fully recover until August 4 2005.

2005Nov09 Open: 7.17

2005Dec16 Close: 6.10

Change in stock price: -15%

Stock price finally recovered 3 weeks later on Jan 6 and ran up to 12.87 before it dipped again. That rally continued through two good earnings reports and didn’t run out of steam until it hit the 52 week high of 16.59 on July 3.

2006Jul03 Open: 16.26

2006Jul24 Close: 13.97

Change in stock price: -13%

No idea if we’re actually done with the naked shorting or this is just a breather. Latest close is 14% off the Jul 3 close.

For Mittal Steel Company NV (MT), I came up with the following stats.

2005Feb16 Open 38.10

2005May16 Close 24.72

35% Loss. It finally recovered on March 28, 2006.

2006May31 Open 30.81

latest close 33.66

Gain so far: 9%. Looking at the technical chart, it appears to me we might have had a rally in the making that got killed by all the naked shorting.

The biggest surprise was True Religion (TRLG). I discovered that TRLG was the only stock out of all that I researched that went up significantly while being attacked using naked shorting.

Here is what I found:

2005Jan24 Opened 8.20

2005Feb04 Closed 9.15

Gain: 11.6%

Jan 26 is when TRLG filed their earnings report. The attack was brief and clearly ineffective considering a 10 day runup of almost $1.

2005Jul18 Opened 16.16

present Closed 18.07

Gain: 11.8%

Although TRLG dipped pretty hard in the last quarter of 2005, it recovered dramatically and posted a nice gain for the year. This attack is now a year old which makes me wonder if a lot of those FTDs are sitting out there from the beginning and the manipulators have moved on to riper pastures. If so, they must have collected a LOT of money on shares they never delivered.

I’ve started reading up on technical chart reading and have started looking closely at a few key statistics. My strategy is to pick likely stocks for investing by watching the fundamentals like growth, the income statement and forward earnings and then investigating the charts for these stocks for buy/sell indicators.

My first foray into this last night netted me a number of stocks I thought should perform well. Some I’ve mentioned before. With commentary on what I saw by examing the Bollinger Bands, MACD and DMI, they are:

• EEEE Educate, Inc. Strong downward trend right now. If I had it, I would be selling ASAP. Today it got a 9% haircut
• PKTR Packeteer Inc. This stock looks like a turnaround opportunity but the chart says no. Sadly, I’m already in it, but not too deep. I looked for resistance and support lines and thought I saw one at $9.35. Today, it peaked at $9.23, so I’m still holding. I’ll sell Monday unless I see a trend develop.
• SMSI Smith Micro This one looks weak on the technicals, but the earnings report from this week was so strong, I’m calling it a hold it if you got it. Otherwise, it would bear watching for a big run up once it reverses.
• LBIX Leading Brands Another stock that looks like it is just starting to turn the corner but this one is giving huge buying signals looking at the Bands and DMI. The MACD is contrarian but might flip soon giving me an all clear to buy. I’m already in this one for a small position, but I’ll start adding when I see a strong move upwards.
• ARD Arena Resources All signs say yes. The only thing holding me back on this one was the volatility as demonstrated in the high time premium options are getting right now. Could be a big winner with the right call option.
• ORB Orbital Sciences CP This one is also looking like it’s headed up, but I’m worried that it will be headed for a dip soon. The ADX flattened out and the divergence value on the MACD is collapsing. I still took a position with some Aug 20 calls hoping to lock in a short term gain before it rolls over. I’ll know on Monday.
• GTRC Guitar Center This one is looking nice because the price just ran up towards the top Band and the MACD is up and accelerating. The DMI is about to cross, but the ACX isn’t showing the stock as currently trending. I’m going to watch for the trend indicator to start heading north before I take a position here.

Pretty fascinating stuff. I looked back at some of my earlier trades and I can see where I goofed on some not so small losers.

Here’s a few I like. I’m not in all of them, but I’m watching them closely.

Oceaneering Intl Inc (OII) ($44.17 close yesterday)
I like this one because I’m bullish on oil prices. As the price goes up, it becomes more economical to revive older rigs and hit those more expensive reserves. Both good for OII as it creates new demand for their services. As a hedge against oil prices, the next few years of hurricane activity, if it is indeed as active as predicted, will also be good for maintenance services on the floating rigs in the Gulf Of Mexico.

Tenaris SA (TS) ($40.44 close yesterday)
I’m bullish on steel thanks to growth rates in the Asian markets. They can’t get enough of the stuff and I think it can’t help but push the stock along with it.

True Religion Apparel (TRLG) ($18.58 close yesterday)
I usually hate companies in markets that are so dependant upon fashion and the faddish whims of consumers because I don’t think they are sustainable, but for a short term pick, I’m very bullish on TRLG. They’ve got solid fundamentals and are just piling on the good news right now. Hey, and anything that might make my ass look better can’t be all bad.

All of these stocks came to me by looking at IBD and I must say, I picked them in spite of that.

Other picks:

Novell (NOVL) ($6.18 close yesterday)
These guys are getting hammered in the market right now, and rightfully so. But, they finally canned their CEO and CFO and are releasing some stellar products with a long window of opportunity to generate some market share before Microsoft shows up to the party with Vista. I’m not expecting miracles, but I do see this as a long term buy. It wouldn’t hurt my feelings to see IBM or Oracle tendered an offer either.

EZCorp (EZPW) (42.58 close yesterday)
Solid fundamentals and membership in a booming market sector. What could possibly go wrong? If the economy goes sideways, owning this one would be like having a license to print money. They have a sophisticated pawn operation, make loads of money on those expensive payday loans, and they’re opening new stores at a rapid pace.

Leading Brands Inc. (LBIX) (6.87 close yesterday)
I have no idea why I like them. Perhaps it’s because HANS is just a bit too rich for my blood-even after a 4:1 split. Still, solid growth and good financials. I took a position in this one hoping for the best.

I’ve decided today to broaden my blogging to address other things I’m interested in. Blogging on tech stuff just hasn’t been motivating enough.

The other day, I decided to toss a few bucks at Mittal Steel Company NV MT in the form of 3 contracts of MTGZ.X figuring it would move a bit and let me get out in a day or two. I figured it was on a quick climb and I didn’t want to miss the buy, so I wrote it as a market order.

The bid is up to to $8.10, but I’m the only volume on that option today and I didn’t lose my shirt, so I’m happy!