Yet another fantastic session for CNIT. I really feel like I started this blog at just the right time (7/1), right before this pretty little stock started popping. Today I kept my core position intact (23k shares) and sold the 5k I bought yesterday for a +$0.21 (+9.3%) gain. I had the sell order for that lot at $2.48 because I felt that it would be an area of resistance. In hindsight I could have kept longer, but then again 9.3% in one day isn't bad...
The chart below was made using www.FreeStockCharts.com, a fantastic in-browser Silverlight application that let's you do charting for free. I highly, highly recommend checking it out. Based on today's action there are several things to look at:
- CNIT has entered a new trading range which it stayed in for a long period of time between early April and late May. As a result the "easy" assumption would be to say that major resistance will be felt at $3.01 (high on 5/10), with an earlier level of resistance at $2.83 (high on 4/7 and 4/25, and approached at numerous other times), and major support will be seen at $2.32-2.33. If the stock continues to show strength tomorrow, I believe it will confirm a higher level of support around $2.50-2.55 as well, as this served as a strong support level for pretty much all of May.
- The stock is now well above the 50dma, and on its way to the 100dma, which stands today at $2.91. More importantly, however, we should soon see an upward reversal in the 50dma. If some consolidation happens at this range, with only little strength we could soon witness a crossover of the 50dma over the 100dma which would be a great bullish signal for the stock.
- Volume today was splendid, with 1.17M shares traded. As I mentioned yesterday, continued strength in volume is necessary for CNIT to continue showing strength. The volume indicates particular interest in boosting the stock, and also diminishes the interest of CNIT to short-sellers (which are still numerous for these kinds of stocks). Growing momentum in volume is also a bullish sign.
While I'm at it, I also wanted to add a note about yesterday's news item regarding the Hunan Province hospital system. In this Seeking Alpha article, Alex Shadunsky attributes yesterday's gains to this win, and explains that, as the Hunan Department of Health has chosen CNIT's DHIS (digital hospital information systems) for use throughout the entire province, it greatly increases CNIT's coverage and presence in China. I believe that this fundamental piece of news, alongside the undervalued quality of the stock and the strong bullish technical indicators are jointly to thank for the recent upswing.
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