NewLead Holdings (NASDAQ: NEWL) and NeurogesX (NASDAQ: NGSX) are case studies in how small cap traders can profit from the short term inefficiencies inherent in financial markets.

NewLead Holdings is an international shipping company, based in Greece.  NeurogesX is a biopharmaceutical company from California.  Both are trading well beneath their year highs.  Both stocks have also been in the daily top gainers and top losers recently for reasons having nothing to do with the fundamentals of the company or core business.

That is where the opportunity for profit awaits for small cap traders.  NewLead is down almost 74 percent from its year high.  All tanker stocks have been devastated by the low volume of shipping in global trade and the high cost of fuel.  However, the stock is trending upward; and is trading above its 20 day and 50 day moving average charts.  Insiders own almost 72 percent of the company and it has a low beta.  Earnings per share and sales are up strongly for the year.  The short float is under one percent, which is extremely low.

NeurogesX presents the share overall picture as NewLead in terms of how the share price fluctuates.  Good news on a clinical trial sent the stock soaring to over $4 a share in mid June.  It is now trading under $1.70 a share.  Institutions own more than 73 percent of Neurogesx.  There was very heavy insider selling recently for NeurogesX.  After such a huge spike in mid June, NeuorgesX is trading well below its 20 day, 50 day and 200 day moving averages.  Its relative strength index is under 37, with 30 considered the benchmark for a stock to be considered oversold.

For small cap traders looking to speculate for profits, both NeurogesX and NewLead should rebound.  Ben Graham defined “speculating” as trading to profit from the conditions of the market, rather than from the conditions of teh company, which is “investing.” NewLead and Neuorgesx present this opportunity for profit now due to short term inefficiences in the market.  Be prepared to move in and out quickly as both stocks have daily volume well under 100,000 shares.