Millionaire Reveals Top Trade Idea Each Week CEO, Jeff Bishop, shares his top pick for the week each Monday, straight to your inbox.
“My strategy aims to help you pull one winner out of the market each week, regardless of market conditions!” – Jeff Bishop

The Inside Scoop On My Latest Trade

While this one may be priced a bit outside of what I advertise, GFRE has all the makings of a big payday and for those of you who have been on my list for quite some time, you know I’ve been waiting to strike.

I know, I know… the bottom was declared at $5.50 and I had two chances to grab shares there but I just wasn’t ready. Partly because I don’t always put a lot of faith in double bottoms and partly because I just wasn’t ready. Keep in mind, while the extra $.50 cents would be nice on my 3k shares, if this stock does what I think it can do, it’ll just take a bit longer to reach my goal. Seriously, that’s how much margin for error there is on this one and how badly it’s undervalued right now.

So today’s entry at $5.96 was calculated on the following information. This isn’t rocket science, China is in the middle of a shit storm right now but I guarantee you some of these stocks are not committing fraud and when the dust settles some shorts are going to lose a lot of money.

A. Per the last settlement date of 3/15/11 there is a short interest of 2,383,383 shares which is 8.95% higher than the previous settlement date. With the average daily share volume at 264,353 that would take 9.02 days to cover.

B. The market cap on GFRE is right around $200m which means if it opens up, it could move very fast… remember LOCM?

C. Gulf Resources sees revenue growth of 24% and net income climbing 27% this year

D. GFRE is getting analyst price targets of $10 and while I don’t typically put much weight into analysts hype, I tend to agree with them here

So in summary, when you consider the huge short position, price targets and numbers behind this company I think it’s a safe bet for my money as a short to mid term trade. If it squeezes, $8’s and $9’s could be a lot sooner than you’d think for a stock this size. My initial order was for 5k shares but $5.96 ran away from me on the bid so I’ll add to my position tomorrow probably.

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