Tuesday, February 5, 2013

Back around $1, w/ good volume

Yes, CNIT's back around $1 a share right now. But today something interesting happened - the volume was pretty high with nearly 200k shares traded. I can't stress enough how important volume is for small cap stocks. That's especially true today with the skepticism around Chinese microcaps.

Friday, February 1, 2013

Teasing the resistance

Our buddy CNIT ended the week on a pretty positive note, up 4.85% on >60K shares traded. If the volume had been higher, though, I'd be more optimistic. On the other hand, this was a very compelling positive sign compared to yesterday's flaccid action.

There's clearly a lot of resistance in the $1.10 to $1.20 range. This week was notably positive rather than sideways, and suggests that next week CNIT will attempt, probably more than once, to get above that level of resistance.

Just like back in October 2012, however, it could easily falter back to the ~$1 level. BUT, if there's enough volume to show broader investor appeal, then the stock might just have a breakout chance.

There is no new news from the CNIT website as of today. Any other news coming out of the company in the coming weeks could also positively impact the stock price.

Have a great weekend!

Wednesday, January 30, 2013

Steady as she goes

Yesterday I mentioned that I was looking for a small early gain and a volume around 100K shares to feel decent on today's action. Well with a daily trade volume of 99,956 shares traded and a gain of 5.94%, I'd say today wasn't so bad. Of course, a higher volume would be much more meaningful for this gain, as we could easily see the stock drop back to $1 tomorrow, but having a 3rd consecutive day with relatively high volume is certainly a good sign.

Tuesday, January 29, 2013

Long term technical analysis + today's action

Today's price action on CNIT was quite interesting, but before we get to that let me make a few comments on technical analysis for this stock.

Given the lack of liquidity in small cap stocks, technical analysis tends to be less useful when applied for short or even mid term trades. Long term trends, where volume has time to accumulate, can be interesting to look at, but even then there are frequently less discernible patterns than for highly liquid stocks. Note also that in microcaps there tends to be less machine trading, which, among other things, means that patterns will be fully dictated by personal investor sentiments, funds (where appropriate), insiders, and, largely, news.

The following graph shows the daily chart since early 2011, with price consolidating over the last year in a range around $1. The fact that the range has been so tight for such a long period of time is a combination of inaction in the stock as well as a potentially bullish indicator.

The white line is the 200 DMA. This moving average has been on the decline for years, and currently stands at 1.02. The 100 DMA and 50 DMA, which are plotted below (in yellow and pink, respectively), have been below the 200 DMA for this entire period. The 100 DMA is ticking up, however, and a move above the 200 DMA could also be a bullish indicator.

There are a variety of additional long term patterns and indicators which could be used to make a bullish case for CNIT, but as per my earlier caution I don't think it's worth making too much of a technical case for a microcap stock.

Today's action
Now onto today's action. The stock open lower, shot up to spend most of the day between 7% and 11% up, and finished the day at a clean 0% change. What does it all mean?

Volume was quite high today, with over 200k shares traded compared to a 30-day average (which includes yesterday's high volume day) of around 30k. This morning's trading felt very positive, and represented the majority of the volume, with the price dwindling on few trades throughout the afternoon.

It's possible there were some folks who had been in the stock long term and were ready to get out at any early signs of a breakout. It's also possible that folks who bought in at the $1 +/- $0.2 (and there are many of those - do a volume at price chart for the past year to see for yourself) were happy with a 6-10% short term gain. In either case, getting those folks out of the stock isn't necessarily a bad thing for a longer term investor, or for someone with the patience to ride a longer breakout.

From a technical standpoint (for the necessary caveats refer back to paragraph 2), the candlestick for today's action was a "shooting star". It shot up, but ended right where it ended yesterday, but at least made up for some lost ground in early trading.

Generally a shooting star is a bearish pattern, though it can also signify a trend reversal. In either case, it requires confirmation and more indicators before it's recommended a trader take action on it (but hey, don't all technical indicators require confirmation?). For me, this is more bearish than bullish from a technical standpoint because it looks like a failed breakout. Looking at a long term chart, however, you might read it as a trend reversal towards the upside.

Since, from what I can tell at least, there wasn't any particular news out of CNIT today, it's highly likely that today's trading was largely impacted by yesterday's bullish patterns and speculation about what direction the stock might take. I'd wager the afternoon drop-off was due to investors feeling impatient and either taking small short-term gains or slightly lower long-term losses than they would at $1.

With all this, I believe tomorrow will be a deciding day for CNIT. I'm looking for decent volume (at least 100K shares traded) and a small early gain to feel good and start sensing more bullishness out of the stock. If however volume is very low, this could signal resumed inactivity for CNIT trading. If volume breaks upwards of 350-400K shares with a gain, I would add to my position expecting a breakout to occur with significant potential upside.

1/29/13 early trading

In early trading this morning, CNIT is up 10.88% on pretty good volume.

A quick look at market news / media attention brings up an article on Smallcap Network pointing out that there may be an opportunity in CNIT: http://www.smallcapnetwork.com/Three-Ways-to-Get-the-Trading-Week-Started-Right-OCZ-CERP-CNIT/s/via/1789/article/view/p/mid/3/id/329/.

In their words:

"Last but not least, you have to take a big step back to really see it, but China Information Technology, Inc. shares have been brewing up a breakout effort that's on the verge of finally being unleashed. The chart of CNIT below says it all."

And here's the graph they reference (source is the link above):

Monday, January 28, 2013

What's New?

In my earlier post I discussed a potentially renewed interest in China Information Technology, Inc., or CNIT, who, not surprisingly, provides IT solutions in China. The company is headquartered in Shenzhen, one of the big commercial hubs of mainland China, and was the result of a reverse merger that was, at least in part, one of the reasons US investors started retreating in the past year. With the latter in mind, I've decided to start re-examining CNIT as it is, in my personal opinion at least, still potentially worthy of some interest.

In this post I want to talk a little about news around CNIT.

If you were to Bing or Google "CNIT", you'd find their Chinese language website and the English version. I don't speak Chinese, and I expect most readers probably don't either, so we'd end up reading the English site. In the "News and Events" section, you'd find that the latest press release was from 11/12, announcing quarterly results (which were far from great by the way), while in company news you'd see nothing since 7/5/12, and you'd probably be unhappy that the "media coverage" section showed nothing new since January 2011.

Ok, so for potential investors, no news on a foreign microcap that's been dropping in value for a year isn't a very good thing. However, I thought this was worth a second look.

On the Chinese version of the website, you instantly notice that there's more information (and that's in addition to the fancy Kanji that instantly make the page look busier...). For one thing there are more options in the top navigation bar, and also if you look carefully the news section has items from 2013!

Thanks to today's nifty modern browsers, I translated the page to get a sense for what was going on. So without further ado, here's the most recent company news on CNIT's website, with some automated browser help for the translation...:

  • 1/21/2013: "I believe that we will work miracles": this is an account of a "Chinese New Year Gala" hosted in part by CNIT, where CNIT Chairman and CEO Jianghuai Lin makes an opening statement. He mentions the progress of projects begun in 2012 for various areas of investment including medical technology, geographic information, and education. He makes various mentions about the value of great employees at CNIT, and talks about making organizational improvements to better motivate and focus employees in 2013. He also talks about making further investments in cloud infrastructure in this coming year. The ceremony continues with awards for excellence and more mentions of the importance of a strong team at CNIT. Of course, given that this is a celebration of the Chinese New Year, cultural festivities ensue, and final remarks talk about the challenging year ahead, where with "energy", "solidarity", and a "tenacious struggle", the company will continue to build products that accrue to the brand values.
  • 1/08/2013: "The Yongtai transit through the acceptance of the National Innovation Fund": this is a short press release to announce that the Yongtai transit project achieved acceptance from the Ministry of Science and a panel of technology SMEs.
If you ask me, it's reassuring to see there's news coming out of CNIT. Now of course we want more program acceptance and business partnerships, and more positive results and progressive restructuring, but a motivational celebration and the confirmation of a project under way are also good.

Earlier today, the stock was up 2.02% with over 330k shares trading hands, which is 25+ times greater than the daily average of the last 30 days.

In after hours trading, which was pretty much nonexistent in the past few months, the stock is up nearly another 4% on 9k shares traded. Sure, it isn't much, but given the lack of liquidity in the stock, even a little AH trading can be meaningful.

With that, please do remember all the caveats and risks of trading small foreign stocks with scarce information. Tread cautiously, but also don't let fear drive you to total inaction.

Happy (belated) New Year CNIT!

Back in...CNIT?

What better day to come back to a neglected blog about a neglected stock than the day where volume, just midday, is over 10x the running average, and the stock is up several points to boot.

Let's not get excited, our friend CNIT, just like many Chinese tech microcaps born largely out of overexcitement for the Chinese market a couple years back (and, of course, the infamous reverse merger trend), has been battered and bruised in the past year.

Struggling within a range of ~.7-1.3 since June, but staying mostly within .9-1.1, the stock has seen little volume to squeeze it out in either direction.

In a later post I will discuss news surrounding CNIT. While there hasn't been a lot, there hasn't been none at all. If you've looked at CNIT's website and are wondering what I mean, check back later and I'll explain.