Avid Stockmasters readers know that we rarely mention penny stocks or OTC (with exception of Steve Reeves, our OTC specialist)

In the past week, Comstock Homebuilding (Public, NASDAQ: CHCI) had risen 270%.

The question is, will it break through resistance at $1 share, or drop back down?

There is no easy answer to this question. But we do know a few things.

Back on August 11, 2008 Comstock Homebuilding Companies, Inc. announced that it received notice from The NASDAQ Stock Market stating that for 30 consecutive business days the Company’s common stock had not maintained a minimum market value of publicly held shares (”MVPHS”) of $5,000,000 as requirement for continued inclusion under Marketplace Rule 4450(a)(2). The notice has no effect on the listing of the Company’s securities at this time, and its common stock will continue to trade on the NASDAQ Global Market under the symbol “CHCI.”

In accordance with Marketplace Rule 4450(e)(1), the Company has 90 calendar days, or until November 4, 2008, to regain compliance. The notice states that if, at any time before November 4, 2008, the MVPHS of the Company’s common stock is $5,000,000 for a minimum of 10 consecutive trading days, NASDAQ staff will provide written notification that the Company has achieved compliance with the MVPHS requirement. No assurance can be given that the Company will regain compliance during that period.

If the Company does not regain compliance with the minimum MVPHS by November 4, 2008, NASDAQ staff will provide the Company with written notification that its securities will be delisted. At that time, the Company may appeal the delisting determination to a Listings Qualifications Panel. Alternatively, the Company may apply to transfer its securities to the NASDAQ Capital Market if it satisfies the requirements for initial inclusion set forth in Marketplace Rule 4310(c).

The Company has not determined what action, if any, it will take in response to this notice. The Company is currently scheduled to have a hearing on September 4, 2008 in front of the NASDAQ Listing Qualifications Panel with respect to its previously disclosed bid-price deficiency.

According to the SEC, “The calculation of MVPHS excludes the market value of outstanding shares of common stock held by officers, directors and beneficial owners of 10% or more.”

MSN Money states that Chris Clemente and Royce & Associates, LLC each own 10% respectively. So cut 20% of the shares in the Float, and CHCI has 8.8 million shares that are included in the MVPHS calculation.  That means that CHCI needs to stay above .56 a share for over 10 days.

In my opinion, there’s not a lot of speculative value left in CHCI shares.  If you share the belief as I do that CHCI is only moving upwards to avoid being delisted, then the time to buy was below .56.

Stocks that break out like this in 2 days will eventually come down fast. Most often than not, they hardly recover the lost ground in a week. I’d say it’s too late to enjoy this ride -better be safe than sorry in this highly volatile market. In spite of that, if shares of CHCI fall below .56, there could be some value left after all.

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