I've been reading the third quarter results from this Chinese company (http://www.marketwatch.com/tools/quotes/newsarticle.asp?dist=¶m=archive&siteid=mktw&guid=%7BE3695B53%2DAB18%2D4F83%2DBE55%2D8EB397B84BC3%7D) and there are many positives:
- Chosen as official Internet Content Sponsor for the Beijing 2008 Olympic Games
This may fuel speculation about the future growth and worldwide brand recognition for this company.
- Revenues for third quarter totaled US$28.3 million, compared to revenues of US$25.9 million for the second quarter, that is, a 9.2% sequential revenue growth.
- Net profit of US$8.0 million or US$0.21 per fully diluted share, towards high end of company guidance
If they make $0.21 per quarter for one entire year (the trend is to grow this number) they would have a $0.84 profit per share, so the current P/E Ratio is $18.21/$0.84 = 21.7. That's too low for the growth this company is experience and may experience in the future.
- As of September 30, 2005, Sohu's cash, cash equivalents and investments in marketable debt securities balance was US$132.5 million.
They have plenty of liquidity to fund operations and investments, it's not likely that they will demand more cash from investors or will increase debt. In fact, look at this:
«Announced $15 million stock repurchase program».
Guidance for the 4th quarter is inspiring:
«Sohu estimates total revenues for fourth quarter 2005 to be between US$28.0 million and US$30.0 million, with advertising revenues of US$19.0 million to US$20.0 million and non-advertising revenues of US$9.0 million to US$10.0 million. Fourth quarter earnings per fully diluted share are expected to be between US$0.19 and US$0.22.»
Technically the stock was near its long term base, but it is rocketing higher since this quarterly results came out. The only thing I have to do to make money in the few weeks/months to come is to buy SOHU at today's open for the 3 Stocks on Fire Portfolio.
Hi, again, the best time to buy SOHU is at $15.00 because that is its strong support.
It is a saying that three big jumps with two gaps, the stock will go down.
I do think that the next few months, SOHU will see $24 again but short term, it may shift down.
I may be wrong and SOHU could continue trading up.
No matter how to trade it, momey will be made to hold it long term.
You maybe be right shawFund, SOHU may consolidate or retrace a bit of its gains here. But it can also continue moving higher and never look back.
I think one should identify the main trend and ignore the reactions. There can be a reaction, but the main trend now is bullish, so I bought this stock.
SOHU was at $24 in July, I think it will go beyond that level on the current general market (specially Nasdaq) ascending move.
I'd like to see the 17.25-17.36 gap get filled.
It's not uncommon to see Falling Wedges "morph" (change) into an Inverse H&S pattern, and structually, the chart would look stronger with some kind of consolidation/right shoulder here.
If SOHU gaps up again and goes to 20.28 resistance or higher, I'd be concerned that it's an Exhaustion Gap, and that the rally would end with most of the gains being given back, or with all of the gains being given back, like the parabolic rally off the April/May lows that ended in the Bearish Rising Wedge.
Wow, nice chart Melf Elf, as usual, thanks a lot :)
I agree with your assessment, but I want to think more of general conditions than company and chart specifics. The market has changed over the last couple of weeks, and what was «normal» or «expected» to happen may not happen anymore.
You probably see as many charts as I do, and you know how we can get used to see prices develop in a certain way. But suddenly everything changes, gaps are not filled anymore, resistances look like never existed, and stocks just keep on moving persistently in one direction.
At the present moment it is up, but the same happens on the downside. Markets are only 20 to 30% of the time trending, and 70 to 80% of the time with chaotic and trendless movements.
I see the present tide as one that will lift all boats and will take most shares to much higher levels. SOHU has a gap, and maybe some consolidation to make, but probably the tide is too strong and the stock will just keep on rising.
I'll continue holding it for the foreseeable future.
Volume dried up completely on this SOHU's consolidation phase, nobody is really interested in selling around these levels, I believe. Soon a new white candle will take this undervalued Chinese stock to new highs.
QuoteThe market has changed over the last couple of weeks, and what was «normal» or «expected»
to happen may not happen anymore.
David,
You sure caught the market change early. Good job. Applause.
Quote
I'd like to see the 17.25-17.36 gap get filled.
On SOHU, it broke some short-term support this morning at 17.91 - 17.95l. While I hope that SOHU goes straight up for you, I still would like to see that 17.25-17.36 gap get filled, to give the chart better structure.
I'd like something between 16.55-16.95 even better, but I'm probably wishful thinking. ::)
SOHU currently is BID 17.76...ASK 17.77. I'm watching it.
http://charts-d.quote.com:443/987073757410?User=demo&Pswd=demo&DataType=GIF&Symbol=NASDAQ:SOHU&Interval=15&Ht=400&Wd=600&Display=2&Study=MACD&Param1=12&Param2=26&Param3=9&FontSize=9
Looking at the intraday charts on SOHU, it has been following a descending triangle on low volume over the last few days, which it broke to the downside this morning. It bounced off the descending trendline again in the afternoon, but did find support around the low of the last gap day, Nov 9th.
It looks to me a little like a descending wedge forming, though it is not contracting very tightly. I would like to see an upside break of this line (well of course I would, I bought just after David did ;)), but if volume continues the way it has been, I think it may just drift further down the way. My real concern is a break of this short term descending support, which I think would signal it is going to the low 17s, short term.
Along with other's comments here, I'm not too sure if I like the look of the short term picture right now ???
Hats off to Melf Elf :)
The stock is coming down indeed to build some more, maybe the right shoulder he's claiming.
I don't feel like selling anything. This is a pullback in overall bullish trends. One should buy pullbacks in bullish trends, not sell them, so ... I'll continue holding SOHU as I will with other stocks.
I feel really tired after those penny stock updates, I'll just say I'll hold SOHU and I'll design a better trading plan over the next update.
I still have some trouble designing a technical trading plan for SOHU, as Melf Elf says, it seems the chart lacks something. Looking at longer term chart I clearly see a base build and I expect higher prices for SOHU in tandem with the current market environment.
Let's give it some more days.
I caught something interesting from the last conference call:
«VI. Stock Buyback Program
During previous stock repurchase program, from May 2004 to February 2005, the Company purchased a total of $37.7 million or roughly 6% of the shares outstanding.
Further, since May of 2004, Charles has purchased 550,000 shares in the open market totaling approximately $9.8 million and exercised 566,000 options totaling $1.1 million. Also, in February this year, I purchased 15,000 shares too. We are firm believers in our company's future and work hard to drive value to our shareholders.»
SOHU is the worst performing stock at the 3 stocks on fire portfolio, it is unchanged since I bough it. I'm still unable to design a trading plan for the stock, I'm waiting for it to define itself, managing my position after I took it.
For now I'll just hold.
Finally bought it at $17.55 and am happy with the timing of my buy.
David,
SOHU is looking much better with this right shoulder that was put in.
From a trader's perspective, I don't like it because my buy order at the gap (17.25-17.36) didn't get filled. >:(
From a technician's perspective, I like the fact that SOHU broke out without the gap getting filled. That's more bullish because it makes it harder for people like me to get into the stock. ;)
I would like to have seen more volume come into the stock on yesterday's breakout, but it was a volume reversal basis the prior day.
Upside Targets:
#1. The late July gap (20.28-20.30)
#2: Inverse H&S pattern: 22.43 is IN PLAY (which is near the July gap from 22.51).
NOTE: These targets are IN PLAY only as long as SOHU remains above 18.75. Below 18.75, the targets are ON HOLD.
You gave me a great help today Melf Elf, with this very understandable and useful technical analysis. Thank you ! (I'll add 3 points to your rating for this :))
I still don't have my chart annotated on this computer, I'll show it «ao natural» ;D
The plan is to continue holding SOHU, whatever happens.
Bought SOHU at 18.73, significantly higher than the 17.30 I wanted to pay for it.
There's always a chance that yesterday's breakout was a fakeout, but I was willing to pay a higher price because the right shoulder that I wanted was put in, and because the breakout "forced me into the stock."
Thanks for the feedback, David.
We've had just a small decline with low volume on SOHU yesterday, nothing to take notice of. I'm glad Melf Elf joined me in SOHU, since this way I know I'll be getting great technical analysis follow through ;)
I'll continue holding SOHU.
I don't know if SOHU will be able to respect the steep trendline I have on the chart below, but that would be a good thing :)
Anyway, nothing has changed and I still have no other option but to continue holding SOHU. Over the next update I'll design a trading plan for it, we always need a safety net when trading stocks. For now I have a 4% profit, I don't think that will go away all of a sudden.
No story to tell on SOHU today, I'll keep holding.
SOHU's chart is quite strange, it is so hard to draw bullish lines in it ... maybe it's because the chart isn't bullish at all ! ::)
I don't know guys, I'm neutral on the general market now, and SOHU looks like a powerful rebound in a bearish trend, not the start of a new bull trend.
I have just 1.41% in profits at this moment. It's not much, but possibly that's all the stock has to give at this stage. I don't have a big trade mentality, and if 1.41% is all I can take, I'll take it !
David,
Sohu is up premarket. I know you won't reconside, but I've set a TL that I liked and followed and will follow. Rises $ 0,12 a day and stands at $ 18,32 today. I believe SOHU still has some leg.
Amarens
Quote from: Melf Elf on November 22, 2005, 09:40:56 AM
Bought SOHU at 18.73, significantly higher than the 17.30 I wanted to pay for it.
There's always a chance that yesterday's breakout was a fakeout, but I was willing to pay a higher price because the right shoulder that I wanted was put in, and because the breakout "forced me into the stock."
Sold SOHU at 19.03. Gain: 1.6%
I "paid up" when I bought SOHU, for the reason given above. Since my purchase, SOHU has put in bearish looking Hangman, Inverterd Hangman, a little Gravestone Doji, etc. Today's action, so far, looks similar. I took the small gain.
SOHU currently is BID 19.05...ASK 19.06
I'm a day late, and several dollars short on SOHU, dang it. >:( >:D
I need a staff of little elves, who do things like come up to me on Friday morning, and say, "Hey, Melf! SOHU gapped down below a H&S Top on Tuesday's smack down in China, and now it's re-testing that broken neckline. Wanna short it?"
Wouldn't that be nice!? :D
"Short breakdowns, and short re-tests of breakdowns."
Chart History 1. After the parabolic rally from roughly 20.54 to 29.43 last Spring, the chart of SOHU was looking pretty lousy when the company came out and validated Wall Street's fears about China stocks, announcing that a change in government policy would adversely effect the company's revenues for the next two quarters.
Wall Street hates that sort of thing, and when the fear became reality, I'm surpristed that SOHU didn't crash immediately. SOHU did, however, get whacked for better than 20% over the next several weeks, and it suffered a Parabolic Return to the origin of the Parabolic Rally (20.54), as often is the case with parabolics, as we've discussed in the past. The low was 20.21.
2. After that low, SOHU put in a Double Bottom, also known as a "W"-Bottom, and broke above the "W"-pivot, 23.50, putting 26.79 IN PLAY, which didn't get MADE right away. SOHU rallied parabolicly again, from 20.42 to 25.68, but this time, SOHU did the wise thing, and went into a bullish continuation pattern.
3. The bullish continuation pattern was a Bull Flag, successful re-test of the W-Bottom breakout. The low of the pattern was 23.26, which was slightly below the 23.50 "W"-pivot, for a Bear Trap fakeout, meaning that anyone who viewed that violation as something bearish, got faked out.
That session was a Bullish Hammer, and the Bull Flag broke out several sessions later, putting a target of 27.66 IN PLAY.
Quote
After that low, SOHU put in a Double Bottom, also known as a "W"-Bottom, and broke above the "W"-pivot, 23.50, putting 26.79 IN PLAY, which didn't get MADE right away.
That "lost target" of 26.79 got MADE, within one penny, four sessions after the Bull Flag breakout, at Red #1. The high was 26.80.
4. From the 26.80 high, SOHO went back and re-tested the top area of the Bull Flag, at Red #2, which is perfectly fine, the on to a new high of 27.58, and the Bull Flag target of 27.66 got MADE, within eight cents.
TIP #1: Targets that are IN PLAY only are "what we're aiming for," based on the calculations off the chart patterns. Sometimes they get nailed, like the "W"-Bottom target, which was within one penny; or they can miss by a little or a lot.
When SOHU gapped up to 27.48, ran to 27.58, then started fading, it's a good idea to "take the money." We don't want to step over dollars to pick up dimes. We'd still be waiting for 27.66 to get MADE, if we required exactitude from targets.
TIP #2: Athough targets often get exceeded, as they were in our recent XING trade, this chart is a very good example of why I "take profits when targets get MADE."
SOHU was done on the upside at that last Bull Flag target. While XING went to 19.94, beyond its 19.05 where I last sold it, it's currently 15% lower, at 16.19.
Our "Greed Devil" always will want that 19.94, but "taking what's given" at targets helps me to avoid that demon.
5. The rally to 27.58 ended up being the top of a Bearish Rising Wedge (pattern in red), and that pattern ended up being the Head of a Bearish H&S Top.
Both of those patterns, at the time, were difficult, if not impossible to find, because there weren't yet the subsequent candles in the chart to complete the picture for us.
That's another reason that I like to "take profits when targets get MADE." It gets you out of there well ahead of being able to see that there was trouble ahead in the chart.
Technical indictors also are very helpful at tops like that. There were a bunch a negative divergences in MACD, relative strength, etc., which don't necessarily mean "sell," but often are a good indication that it might be a good idea to cash in, or at least to take some off the table.
6. The "jig was up" on the February 6 gap down out of the Bearish Rising Wedge that almost went to the 23.26 low of the Bull Flag (pattern in green). I don't know what the news was.
Tip #3: As I've mentioned a number of times, Bearish Rising Wedges, and sometimes Bear Flags, are notorious for morphing into Bearish Head & Shoulders Tops. On that February 6 gap down and low of 23.55, we want to be thinking "Possible neckline (23.26 and 23.55) of a H&S Top."
That's what we got.
7. After putting in the 23.55 low, SOHU completed the Right Shoulder of the H&S Top pattern (circled in blue), then gapped down below the neckline last Tuesday morning after the overnight selloff in China.
I'm never fond of what seems a bit of TA snobbery behind the old saw, "First the chart....then the news," as though the chart ALWAYS is telegraphing the news ahead of time, and telegraphing an impending selloff, but I will concede that it quite often is the case, as we can see in this chart.
The H&S Top was formed, and all this chart needed was
anything that the market perceived as "bad news," to break that neckline.