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.