Stock screens are only indicators of trend. They don’t speak about a company’s potential, its challenges and its future. But, for those of us who are technical analysts, they do tell a story. A story that, if you read it right 70% of the time, will make you very rich.
On my daily stock screens today, I came across a chart I liked. Once I did my research, I found that I liked the company very much, too.
ChinaTel Group, Inc. (CHTL)
Like a lot of China penny stocks, it is incredibly volatile. Lately, they have been on a pronounced downtrend. Talking with their IR people, they surmised that investors were unhappy with the about their March 5th PR concerning amendments to stock purchase agreements for some major holders and a disappointing capital raise. Investors/traders were expecting a great deal more money…and, ChinaTel needs it.
They are setting up wireless broadband telecommunications networks throughout certain regions of The People’s Republic of China. Their first installations are in China with grand plans later of expanding to other countries such as Argentina and Peru. Their plan is to leverage WIMAX technology to emerging markets.
Revenues are miniscule compared to expenses (hence the need to constantly raise capital). But, I am not looking at CHTL as a fundamentals trade (because they stink anyway). This play is about riding the ups and downs of a stock that is sure to have many in the next several months.
Right now looks like a good time to get in with the expectation that the trend will reverse soon.
Here is the chart with my annotations:
Investors are entitled to be unhappy in the short term….CHTL needs more money and every capital raise dilutes us poor retail investors. However, it appears that the company is the “real deal” and will be around for the long term.
I would not be a long-term investor in CHTL just yet, but playing the volatility is fine. I never call bottoms and I won’t in this case. If the current support proves to be durable, I think that CHTL could return some nice gains for the nimble investor.
Trade with your eyes open,
Jeffrey Dean, Editor
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