Yet Another Example Of Predictibility Of Parabolic Stocks.

Yet another example of how parabolic stocks trade pretty much the same way. These stocks run up huge on news, helped by momentum traders. Eventually when the reality sinks in,  the stock quickly drops back.

Ocean Power Technology (OPTT) was up on following news.

Lockheed Martin Corporation and Ocean Power Technologies, Inc. (OPTT) announced that they have signed a commercial engineering services agreement to develop OPT’s wave energy systems for use in future utility-scale power generation projects. Under the agreement, Lockheed Martin will provide its expertise in systems integration, lean manufacturing, and test and optimization analysis to enhance OPT’s innovative PowerBuoy wave power generation technology to utility-scale. This critical step will allow the two companies to pursue future utility-scale power generation projects in North America. The companies agreed to collaborate on such projects in a letter of intent signed in January 2009.

This news was stale news, since a letter of intent was signed in January 2009. Eventually when that reality sunk into investors, OPTT dropped back to reality, down 14% today.

Royale Energy (ROYL) was up on following news.

Royale Energy, Inc. announced that after reaching a total depth of 6200 feet, it has set pipe on what the Company believes to be a significant new discovery. The Goddard 7-1 which commenced drilling on September 23 was located one mile north of the boundary of the company’s successful Lonestar field. The well was drilled to test a significant 3D seismic amplitude at a previously unexplored depth. At this depth the well encountered higher pressure than those produced in the Lonestar field increasing the expected rate of gas recovery. This new field discovery provides Royale Energy with significant new development opportunities to increase its production and natural gas reserves. Current prices for its PG&E citygate is $5.04 MCF. The Company has 2,000 MCF per day sold through December 2009 at $4.85 MCF.

However yesterday ROYL announced a private placement.

Royale Energy, Inc. announced the signing of a definitive agreement for the private placement of approximately $2 Million of common stock and warrants on October 16, 2009. Funds from the offering will be used for working capital that will allow the Company to accelerate drilling of wells in follow up to the recently announced discovery. The terms of the agreement include the sale of 623,053 shares of common stock at $3.21 per share, and warrants which are immediately exercisable for a period of 5 years into 342,679 shares in the aggregate at $3.53 per share. The warrants contain customary adjustments for corporate events such as reorganizations, splits and dividends, and the exercise price of such warrants is subject to weighted-average anti-dilution adjustments in the event of additional issuances of common stock below the exercise price then in effect. J.P. Turner & Company acted as agent for the placement to a single institutional investor.

The company found a good reason to benefit from the positive news by raising more capital via private investors, which means stock dilution, which means selloff, down 9% today.

Conclusion: Parabolic stocks provide good (predictable) shorting opportunity when the hype dies down.