Readers Respond: Additional Insight Into the Recent Drop of BIEL

An anonymous comment regarding BioElectronics:

Hi VFC,

I am not attempting to influence anything here, but just a word of caution on your stated buy in of BIEL at .065. There really is not much support below that price down to near the .03 level. On the other hand, there is a preliminary report due out on the comparison study with Tylenol this month, around the 24th. Being a pessimist, and looking at the continuing distribution on increasing volume I have to wonder if that report might not be that good. But, in any event, I just wanted to send a word of caution about the support levels relative to your next buy in price.

My apologies if this type post is unwanted.

I do not own BIEL , yet.

VFC's Take: I do not mind posts or statements contradictory to my own, and if fact I welcome them - if they are based on the facts and not an attempt to mislead.

Fair enough if this poster believes that BIEL is heading down to the three cent level - he or she did say that he or she is a pessimist; but if this stock were to hit three cents again without news having been released to justify the drop, I would probably be inclined to triple my position. I'd love to get in that low again since the last time that the stock traded for three cents I didn't have the free cash on the sidelines to add as much as I would have liked.

However, with penny stocks - especially those that trade for below ten cents - I don't pay much attention to "support levels" or "resistance levels". I'm of the opinion that these are news-driven stocks and if good news strikes then the stock will move based on the potential of that news to positively impact the company and the stock further on down the road, not because a bunch of speculators are sitting there looking at charts of a five cent stock.

Likewise, if bad news hits - for instance, an FDA denial - then the stock is going to trade down based on the decrease of projected revenue and I don't believe the chart watchers would start buying at four cents (for example) because the chart said so if that price could not be supported by potential future sales.

As for the mentioned comparison study, because of the risks to the liver that Tylenol poses that are becoming more of a concern by the public and the regulatory agencies, all BioElectronics needs to do is show that the product is just about as effective as Tylenol, in my opinion, because the health benefits speak for themselves. The BioElectronics products don't need to blow Tylenol (or Ibuprofen) out of the water for that reason.

I personally try to avoid Tylenol myself - I prefer to save my liver for the vodka tonics or dry martinis - but the wifey gets on my case when I've got a fever or something and insists that I use Tylenol to bring it down.

As I was about to press the 'publish' button, another reader posted this comment:

The recent decline in BIEL is due the speculation that the FDA would approve Actipatch/Allay by Oct. 15th. Biomedreports.com originally listed Oct. 15th as the decision date. When nothing was released yesterday morning, some investors sold. This date was mostly arbitrary and just an estimate of the FDA decision, but it did have an impact on the stock price.

VFC, could you put together a post for investors regarding the FDA and how the process works? It seems silly that investors tried to "time" an FDA decision but I think that's what happened over the last couple of days with BIEL.

VFC's Take: Good insight, as there are those investors out there that live by the FDA approval dates and will sell if that date passes with no news.

I will try and put together a post regarding the FDA process if I get the time, but I do try to point out in many posts that the FDA is just another government agency at the end of the day, and when have we ever known the government to do anything on time?

The FDA, according to some statements of their own in previously released public statements, has a lot on the table right now and I'm also assuming that there was a large amount of turnover this year as a result of a new administration coming into office.

I always emphasize - if nothing has changed with your stock, and the stock dips, then take advantage of the opportunity to add - if your own DD supports that action.

For VFC, I'll be adding on the dip.

Disclosure: VFC is long BIEL.