3SOF

Now what? Is this going to bottom out in the morning?

China Digital Announces Termination of Agreement to Acquire Zhuo Tong Power Supply
Monday , June 26, 2006 18:00 ET

LOS ANGELES, and SHENZHEN, China, June 26, 2006 /PRNewswire-FirstCall via COMTEX/ -- China Digital Communication Group (OTC Bulletin Board: CHID), one of the fastest growing battery components manufacturers in China, announced today that the company's board of directors has voted to terminate its previously announced agreement to acquire Zhuo Tong Power Supply Company.

China Digital CEO Ran Liang, said, "We were unable to conclude a final agreement that was favorable for our shareholders. Therefore, our board of directors has voted to not proceed with the acquisition. However, we remain on track to conclude our acquisition of Galaxy View International, Ltd., which operates through its wholly owned subsidiary Sono Digital, a leading supplier of third-generation (3G) communications technology and equipment in China. This continues to be an area of high interest to our company, and we will continue to seek out appropriate opportunities in this market segment."

As a result of the termination of the agreement to acquire Zhuo Tong, the company revised its previously announced guidance. Assuming the acquisition of Galaxy View is successfully concluded in 2006, the company said it is targeting 2007 revenue of $30.7 million and net income of $10.1 million with fully diluted EPS of $0.16 per share. Revenue and earnings in 2006 will be determined by the timing of the Galaxy View acquisition. In 2005, Galaxy View had unaudited revenues of $6 million and unaudited net income of $2 million.

The company emphasizes that the foregoing statements regarding targets for 2007 are forward-looking and actual results may differ materially. These are the company's targets, not predictions of actual performance.

I would like to see an instruction to SELL or HOLD.

Is it gonna tank todyay???  Should we bail?


Thank you...Jody

So they decided to canel the acquisition with Zhou Tong Power Supply.  Definitly not what I thought was coming.  I'll assume that this deal was really not going to benefit anyone.  After they decided to cancel they are showing an increase in EPS to .16 for FY 2007  with the closing of the Galaxy deal.  With any OTCB stock one will always wonder if this might have been some pump and dump play.

I guess we are going to have to trust the new CEO and the board of directors that this really wasn't in the best interest for anyone.  I also don't believe that the acting CEO purchased 560,000 shares of stock thinking she wouldn't be making some money down the road.

We shall see what today brings.

GLTA....Alien

 

I am a newbie at this trading thing. I have learned quite a bit early on when I first subscribed to this board. Maybe it is just me, but I feel as though the portfolios have been neglected. Even just a quick note when nothing is happening would be a positive note.....especially in a market as we have had lately. I am feeling as though there is not much different between this and a free message board.  I only write this in light of the news for this shock that might be fairly significant from last night....an no mention. Sorry....to be negative....I just enjoyed all the information early on.

I agree that someone on the team should post a word or two on the CHID action as of late.  The news obviously isn't good but this selloff could be what CHID needs to start moving up again.  It's funny but sometimes an event like this will shake out the weaker hands and end up being bullish for a stock.  We'll see.  CHID is actually recovering pretty nicely as I type....

Perhaps CHID is better placed in the 3SOV rather than 3SOF.  I cannot imagine a big gain in the short term.  Mgmt does not expect to close the Sono/Galaxy deal until closer to the end of the year (if at all).  There are no short term catalysts that I know of.

Quote from: buddjas1 on June 27, 2006, 11:10:35 AM
Perhaps CHID is better placed in the 3SOV rather than 3SOF.  I cannot imagine a big gain in the short term. 

yes, this has not been "a stock on fire" for a long time.
maxi

I wonder sometimes if there is some kind of scam going on with this stock, because fundamentals show that it should trade around $2.50 per share -- they really need better investor communication.  I had to sell my shares today, but still interested in owning once the fire is ignited again.

The stock broke the trend line 3 weeks ago but then made a try at a bounce at the horizontal support. That did not hold but now it is near a longer term support.

I see they think they could do 16 cents and at a PE of 10 that would be share price of $1.60 at some point.

There has been a death cross recently but it can change if the stock goes up in a few days.

It is generally good to buy a stock under the bottom Bollinger band unless it is just starting a correction or if there is bad news. In this case there is no bad news - they will save a ton of stock k so less dilution at this time.

We will see how it closes as some may try to take it lower at the close. But it seem it is in a buying range with a stock below the dotted line support. The market in general will likely have a decent rally for a few weeks in July.

Stochastics need to turn up but if this closes with a hammer it may turn back up shortly.

With 3SOF showing a 6% gain for the year, that 5.5 % Bank CD is looking better all the time!

Quote from: basonista on June 27, 2006, 10:13:51 AM
It's funny but sometimes an event like this will shake out the weaker hands and end up being bullish for a stock.  We'll see.  CHID is actually recovering pretty nicely as I type....

I know what you mean, but wishing I had been a "weak hand" and sold at .65 lol.  If it hits .52 again near term I am selling half again as I think that will be resistance for awhile.  Still looks good for end of year, assuming they dont cancel the other acquisition.  Man, they really toyed with investors by talking things up a week before cancelling one of the acquisitions...

Quote from: basonista on June 27, 2006, 10:13:51 AM
I agree that someone on the team should post a word or two on the CHID action as of late.  The news obviously isn't good but this sell off could be what CHID needs to start moving up again.  It's funny but sometimes an event like this will shake out the weaker hands and end up being bullish for a stock.  We'll see. CHID is actually recovering pretty nicely as I type....

Ramsburg will update the trading plan later today but let me give a fundamental view on the stock here.

It is not surprising to see a sell off after the failed take over of Zhou Tong after all there is a lot of long holders of the stock that are very disappointed right now. But does this failed take over mean that CHID fundamentally is doomed? Well I don't think so 

I personally like a management team that are willing to walk a way from a deal if they can't reach terms that are favorable for the shareholders. Nothing wrong in that! CHID has a very good business supplying a booming consumer electronics industry in China and they are not desperate to make acquisitions (as you too often see with other OTCBB's)

It was disappointing that they didn't update 2006 guidance but the 2007 gives PE of 2.8. Now that is ridiculously low and to be honest can only be justified if this stock is a total scam.

There is absolutely nothing I have seen that indicates that this is a scam. The fact that they walked away from the Zhou Tong deal makes me even more confident about the fundamentals. After all if it were a scam the deal would already have been concluded.

I think that it would be a mistake to sell the stock now. I could easily see it bounce from here. The way back up might be painfully slow but that kind of pain is easier to live with 

Thanks Michael for your comment.

Update:
Very depressive day for anyone holding CHID
For the past few sessions CHID was trading near the $0.49 support with some positive reactions there, but all upside attempts were followed by some selling pressure making this a «nervous» pattern of hope and fear. The news about the Termination of the Zhuo Tong's acquisition was obviously taken on an exaggerated way by many traders who simply lose their patience after all this hard time.
Like Michael said, this is not the main issue about CHID, it's not something fatal for CHID's future, and after all the recent down move, a fact like this is already discounted, it's maybe the rational explanation of the incomprehensive behaviour of CHID's price.

We obviously made a big mistake holding CHID all the way down this chart... but the mistake is already made, and we can't change that.
I'm looking to yesterday's session as an exhaustion selling day after bad news... from the classical quote «buy the rumour, sell the news» this doesn't look like the right time to sell CHID, yesterday was the day everybody sold the «news», the stock opened with a gap down, followed by extreme selling to $0.41 and a bounce after that.

CHID looks like a legit company, its fundamentals are great, and its current price looks unreasonably low. Although, we can't afford to be wrong again about CHID, so we'll set a stop below yesterday's low, if it gets triggered it means that the exhaustion selling scenario is wrong, and there is something outside the picture we are not seeing right.

Trading Plan:
Hold CHID with a stop @ $0.3990

It was nice to watch CHID recovering again from the Tuesday's lows, volume was low, but CHID managed to close a little above the $0.49 resistance. From a technical point of view, the $0.49 level is the main resistance, but at $0.50 we have the descending channel top resistance. As we can see this is a strong technical and psychological level, which means that a breakout could lead to a further move up.

It's very soon to think about this but sometimes before the big move up after a long correction period, a stock needs to have a final fake downside breakout to «clean down the house». That would be the perfect scenario for us.

Trading Plan:
Hold CHID with a stop @ $0.3990

Regards,