Are These Clues From Ceres the Real Deal? (CERE)

Despite the fact that markets are right around breakeven levels for Wednesday, there are relatively few stocks that are up today, and even fewer that are up on strong volume. For the NYSE, 54% of its listed equities are in the red this morning, and 58% of the total volume seen so far has been bearish volume. That's what makes Ceres Inc. (NASDAQ:CERE) so interesting early Wednesday. As one of the few tickers that's not only up, but up on higher volume, CERE is a standout worth a closer look. And, that closer look reveals something even more compelling about the way things are coming together for this small cap stock.

With a market cap of just less than $40 million right now, Ceres Inc. doesn't turn a lot of heads ... at least not yet. But, this agricultural science outfit has at least caught the attention of enough of the market's right players to keep some traders on the hook. Case in point: TheStreet.com's Roberto Pedone suggested CERE was a breakout candidate a few days ago [sometimes the suggestion of a possibility is as good as a flat-out 'buy' recommendation], and then as Forbes pointed out yesterday, the average analyst's target price for Ceres is a little more than three times its current price. Between the two, the tone and mood surrounding the stock has been decidedly bullish.

There's nothing as compelling right now, however, as the shape of the stock's chart.

CERE hasn't been a particularly strong name of late. In fact, it's never been a strong stock, falling from a peak of $15.59 in early 2012 shortly after it began trading on the NASDAQ to a low of $1.10 in August of this year. It was an enormous case of bad luck, issuing stock at what ended up being the beginning of a feeble-to-begin-with biomass/feedstock agricultural buzz, though unfairly high expectations from investors may have helped contribute to the stock's demise.

As they say though, nothing lasts forever. That includes weakness. Indeed, Ceres shares look like they're about to be stronger than they've ever been before. How so? For starters, a bowl-shaped reversal that began back in late August. This is the first time since late last year CERE has made a string of higher lows and a string of higher highs at a sustainable pace. The sheer organization of the effort speaks volumes about how traders are really starting to warm up to the stock. More than that, however, it's clear that the stock is finding support at its key moving average lines while working on the budding rally. That was the missing ingredient with past rally efforts. Finally, though still a little erratic, the volume basically grows on the upswing, and the volume fades on the pullbacks. This tells us the overall environment is a net-bullish one. Today's bullish pushoff from the 50-day moving average line (purple) is something of a clincher.

It's too soon to call Ceres Inc. a long-term buy, but based on what we've seen of late, it's certainly a pretty good short-term bet.

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