Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Wednesday, March 15, 2006

Ctrip.com (CTRP) Updated

Last August (2005), I posted a case study on Ctrip.com (CTRP), a Chinese holding company that consolidates hotel accommodations and airline tickets. I listed a chart with the obvious pivot point of $58.50 on the cup with handle pattern. The stock went on to breakout but then violated the sell point forcing me to close the position. I never moved back into the stock but I can tell you that it never broke below the long term moving average support and has since gone on to make more than 35% (from the original pivot point).

The original case study is listed below with an updated chart to show you what has happened since we targeted the stock last summer. Timing is a key component when attempting to make money in stocks but cutting losses short is even more important. If you followed rules with this stock, you could have bought the original pivot point, sold for a small loss and then reentered at the 200-d m.a. or the last breakout to the up-side for the most recent gains.

Often times you will buy a stock that looks solid for the long term but buy it at the wrong time. This doesn’t mean that your stock selection was wrong; it just means that you must follow rules to eventually realize a profit (even if you are forced to sell one or more times). CTRP turned out to be a winning stock but not the way I anticipated when I added it to the MSW weekly screens (MSW Index) last year.

These are the updated institutional numbers (study them and then look at the difference from last August – numbers located below):

Number of Institutions (latest reporting period):
Total: 165
Money Mangers: 73
Mutual Funds: 87
Other: 5

New Positions: 51
Positions Sold Out: 37




ALL INFO BELOW THIS POINT FROM 8/23/05
CASE STUDY – Cup with Handle Setup
CTRP – Ctrip.com Intl ADS


Leisure Services - Transportation

Ctrip.com International, Ltd., a holding company, consolidates hotel accommodations and airline tickets in China. The company aggregates information on hotels and flights and enables its customers to make hotel and flight bookings. It also offers packaged-tour products and other travel-related products and services. The company enables its customers to choose and reserve hotel rooms in cities throughout China and selected cities abroad; book and purchase airline tickets for domestic and international flights originating from China; and choose and reserve packaged tours that include transportation, accommodation, and sometimes guided tours as well. It offers its services to customers through a transaction and service platform consisting of centralized toll-free, customer service center, and bilingual Web sites. It offers its services primarily to business and leisure travelers in China, who do not travel in groups. Ctrip.com International was founded in 1999 and is based in Shanghai, China.

CTRP has been making numerous daily screens over the past several weeks and a few “short lists” on our weekly screens. This past week, CTRP was one of the new stocks that we are watching on the weekly screen. After reviewing the fundamental numbers further and studying the chart, I decided that this stock would be best suited for a case study due to the cup with handle pattern formation.

The company smashed earning expectations in the second quarter of this year but gave a soft outlook for the third quarter. According to analysts, the company is usually hesitant when giving future expectations. Some analysts point to rising competition within the Chinese online travel industry, giving us lower expectations going forward. In any event, we can only go by past earnings numbers and current technical analysis. See our chart analysis under the “Chart Legend” section of this case study located below the fundamental breakdown of the stock.

Sister Stocks:
Ambassadors Group Inc. - EPAX
Intrawest Corp. - IDR
Bluegreen Corporation - BXG
Steiner Leisure Ltd. - STNR

Key Ratings:
Overall Rating in IBD: B+
EPS Rating: 76
Relative Price: 86
Industry Group Rank: 113 (of 197)

3-Year EPS Rate: 113%
3-Year Sales Rate: 83%
ROE: 28%
PEG: 1.13

EPS Analysis:
2003: 0.06
2004: 1.02
2005: 1.48 (E) High estimate: 1.62
2006: 1.98 (E) High estimate: 2.39

Revenue: (in millions)
2003: 173.00
2004: 334.00

Net Income: (in millions)
2003: 53.8
2004: 133.00

Number of Institutions (last reporting period):
Total: 38
Money Mangers: 21
Mutual Funds: 16
Banks: 1
Insurance Co.: 0

New Positions: 16
Positions Sold Out: 9

Chart Legend:
1. The stock started with an IPO in late 2003 with very volatile movement but then quickly started into a down-trend until bottoming out in May of 2004.
2. After a brief up-trend, the stock formed its first cup with handle base last summer and then exploded into a strong up-trend that took the stock from $34 to $55 in less than two months.
3. After the peak near $55, the stock formed our current pattern that has lasted for nine months with a nice shaped cup base and handle formation.
4. The only problem that I can see with the cup shaped pattern is the lack of strong volume on the right side of the base.
5. The handle has been forming for seven weeks with decreasing volume, an excellent sign of shaking out weak holders.
6. The pivot point was set $0.10 higher than the highest intraday high in the handle at $58.50.
7. A move above $58.50 on volume with at least 242k shares traded would qualify as a strong buy.

The general market is not healthy but some stocks tend to defy the general market trend and follow through for a breakout. The ideal situation would have the stock breaking out while the market is starting to breakout, confirming that the stock may be a market leader in the next rally.

If the stock breaks out and you buy, make sure your mental sell stop is already placed in your head or on paper. If the stock fails after the breakout and your stop area is triggered, DO NOT hesitate later date if the timing is wrong. The ‘M’ in CANSLIM is not healthy so the stock can give a false breakout.

Piranha

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