Wednesday, April 16, 2014

AvWorks Aviation - aka Vapor Group - Is Pumped and Primed (SPLI)

It's admittedly scary to try and catch a falling knife, but sometimes it's worth the risk. Case in point? AvWorks Aviation Corp. (OTCMKTS:SPLI) .... better known as Vapor Group. Without knowing more about the stock, the sheer fact that SPLI has fallen nearly 90% since March 26th - with about a third of that coming today alone - the stock would be best left avoided by nearly any trader. For the small group of savvy traders that know the tell-tale signs and know how the market really works, however, AvWorks Aviation, or Vapor Group, may be in a prime buying situation today.... yes, even in the midst of this bloodbath.

For those only vaguely familiar with it, SPLI is an electronic cigarette maker. For those intimately familiar with the company though, they'll know it better as something of a fringe marijuana play. The company manufactures e-cigarette vaporizers and e-liquids in a wide variety of flavors. It also makes what it calls a "Vapor Box TBH" that can vaporize, among other things, dry herbs. The connection to the marijuana trade isn't an official one for Vapor Group - still officially AvWorks Aviation - but the tie-in is clear.

Of course, anyone who's been following the marijuana industry's stocks also knows they've been all over the map, controlled by traders and emotions more than based on value or prospects. And, SPLI hasn't exactly been immune to that insanity, rallying more than 2000% between early February and late March when the company's TBH product was recognized as a way to inhale a herb-based, well, possibly anything.

That insanity worked the other way too, driving the stock all the way from a peak of $0.45 to the current price of $0.05 per share of AvWorks Aviation... almost a complete erasure of the runup. However, today's drubbing to new multi-week lows also looks like it's the final blow - the move that flushes out the last of the sellers and only leaves the buyers behind, starting a rebound rally that could be just as big as the February/March runup.

How do we know Tuesday is the pivot? One of the clues is the sheer size and speed of the selloff. The other (and perhaps more important) clue that Vapor Group/AvWorks Aviation shares are ready to rebound is the fact that today's volume is wildly high. Most pivots occur on volume spikes at the end of long runs, and that's exactly what we have here with SPLI.

With all of that being said, it's critical to bear in mind that this is still just a short-term call on AvWorks Aviation, or Vapor Group, or whatever you want to call it. There's still a lot of uncertainty surrounding the company's long-term potential. For the foreseeable future, however, as of today SPLI is a falling knife worth trying to catch.

By the way, if you're wondering why Vapor Group is still technically called AvWorks Aviation, it was the result of a reverse merger that transpired last quarter. As of the next quarter, the name change should be in effect.

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