Buy This, Sell That: Nortech Systems & Document Security Systems Pointed in Opposite Directions (DSS, NSYS)

In a perfect world stocks would move in predictable, manageable ways. We don't live - nor do we trade in - a perfect world. In the real world we have to adapt to and deal with the curve balls the market throws us, and there are no two stocks that illustrate that point better than Document Security Systems, Inc. (NYSEMKT:DSS) and Nortech Systems Incorporated (NASDAQ:NSYS) to today. While both NSYS and DSS are up today, one's overbought and ripe for a pullback, while the other is likely at the beginning of a trade-worthy rally.

The one that's flown a little too high for its own good is (no surprise here) Nortech Systems Incorporated. Shares are up 43% today, and have gained 84% over the past week, and are up 138% since the end of July. Yes, the results scream "momentum", but common sense has to kick in at some point - NSYS can't keep climbing at this pace forever. Indeed, it will do well to even hold onto this gain.

For those not familiar with it, NSYS is an electronics contract manufacturer, meaning larger and more notorious companies ask Nortech Systems to build parts and pieces of their computers, TV, phones, or whatever. The prod for the big surge was last quarter's earnings, which were admittedly solid. But, enough is enough. Or in this case, too much is too much - an 84% pop in value is going to bring the would-be profit-takers out of the woodwork. Time to take the money and run.

So how is Document Security Systems any different? After all, it's up 38% in just a few days as well, and today's bar (so far) as a doji, where the open and the close (again, so far), are right in the middle of the bar, indication a potential transition from a net-bullish to a net-bearish environment. Isn't DSS just as prone to a pullback? The answer is yes, and no.

While it's true that DSS may see a little short-term weakness, in the bigger picture, the long-term tide has officially turned for the better. And, there's still a ton of upside left to dole out once the stock takes a brief break. If the same pattern Document Security Systems shares made in May of this year plays out again, the stock could top $2.00 before running out of gas. There's a lot of bullish volume starting to flow in here.

Document Security Systems is a digital security company, which has been a real hot-button area lately.

If you'd like to get more trading ideas and insights like this one, sign up for the free SmallCap Network daily e-newsletter. It's full of stock picks, market calls, and more.