CNIT was officially headfake central today. It's up! It's down! It's back up!
Starting the day with a short-lived rise to up to $2.39, the day started off well. There was volume. The market was feeling bullish. However a surge of sellers came in at around 10:22am to sink CNIT down to as low as $2.17. On its way down, I of course grabbed a couple more shares and set some limit sell orders a few clicks up. I then got a few more hours of sleep (I'm on the west coast) and woke up comfortably around 8:45am PST (11:45 EST) just as CNIT started to go back in bull mode. Volume wasn't huge, but there were enough buyers to get the stock back up to around $2.33 and hit my limit orders for a quick profit.
Again, volume wasn't great today but at least the recovery is a good sign, and in fact volume has been increasing slowly over the past couple of days. The key challenge with volume for this particular stock, and the reason I keep bringing it up, is because there are still a fair number of short sellers out there trying to keep CNIT down, and the days-to-cover ratio is significantly higher if there isn't reasonable volume keeping the stock up, which can encourage short sellers to keep doing what they do, which in this case is try to keep a good company down.
Let's look at today's very fun chart.
Just over 300k shares were traded today, with about 10% in that 10:22am spike that sent the stock downward. As of close, CNIT is still holding above the 50 dma which stands at $2.25.
Some technical indicators to pay attention to:
- On the ADX chart, there is an potentially imminent bearish ADX-line cross-over by the +DI. No way to know if this will keep the stock down, though looking at past activity after the large upward push back in October, it could turn into a period of consolidation around a range that would probably be in the $2.20-$2.40.
- The daily RSI is now at 54, just above the centerline at 50, and saw a small bounce today.
In other news, the company release an interesting press release today regarding its Q2 2011 contract wins:
"SHENZHEN, China, July 15, 2011 /PRNewswire-Asia-FirstCall/ -- China Information Technology, Inc. (Nasdaq: CNIT), a leading provider of information technologies and display technologies based in China, today announced that it signed $30.4 million in new contracts during the second quarter of 2011. The Company's core IT business segment contributed 65%, or $19.8 million, of the total contract wins, while its Digital Display segment contributed 35%, or $10.6 million."
They do also add a statement about relative weakness in terms of signing new contracts. However, looking at the 10-Q for the same period last year, we see that total revenue amounted to $33.5M. I'm assuming that the new contract revenue they refer to in this press release don't account for total revenue for the quarter (recurring contracts?). I expect we'll still see some growth, and given what they say in the press release might see margins go up as well ("...efforts towards improving the quality of our earnings"). We shall see.
Have a great weekend!
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