Tuesday, July 5, 2011

7/5/11: $2.38

+0.25 (11.74%)


Today was a great day for CNIT. As mentioned in the previous post, it broke through the 50dma ($2.28) and up to a resistance area at around $2.40. The daily chart is below. We can see that it consolidated for a about 2 hours before dropping back to about $2.28 where it met a newfound support. At this point I longed 5,000 more shares expecting it to run back up later in the day, which it did.


The new area of resistance is a very key and strong range, where CNIT traded from April to late May. I expect that, over a number of trading sessions (could be days or could be weeks), CNIT will trade from $2.40 to about $2.60. Similar to the way it traded from ~$1.85 to $2.05 between close on June 8 up until it started showing strength on June 30 before breaking today, it could in theory stay within this new range for the month of July.

Several factors may accelerate a continuation, including but not limited to:

  • Strength in volume over the next few sessions (today was just over 500k, which is so-so; note however that in its run up from the high $4s to high $6s back in October, it picked up volume but began with days with considerably less volume than today's)
  • Continued strength in the overall market will help boost CNIT further and confirm technical strength
  • A positive centerline crossover of the MACD on the daily chart, which is likely to happen soon, may give increased technical strength
A couple of things could slow the uptrend (though it is unlikely to reverse back into weakness at this time):
  • On the daily RSI chart, CNIT is bordering on overbought - this may slow the uptrend or cause it to enter a new period of consolidation as mentioned earlier
  • Weakness in the overall market or in Chinese stocks may spill over into CNIT; Chinese stocks have been doing particularly well in the past couple of weeks, so if this slows we could also see some weakness for CNIT
As mentioned above, I longed an additional 5,000 shares today, and I've set a limit sell order at $2.49 for that lot as my guess is we'll see some volatility in the $2.35 to $2.55 range for a few trading sessions. In the event that the stock retests $2.28, I've also set a limit buy order at that level for 5,000 shares.

Can't wait for tomorrow's session!

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