SOHU

[David Randolph]

I've been reading the third quarter results from this Chinese company 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.

[shawFund]

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.

[David Randolph]

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.

[Melf Elf]

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.

[David Randolph]

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.

[David Randolph]

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.

[Melf Elf]

The 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.

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

[ScottishTrader]

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

[David Randolph]

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.

[David Randolph]

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.

[David Randolph]

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.

[David Randolph]

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.

[shawFund]

Finally bought it at $17.55 and am happy with the timing of my buy.

[Melf Elf]

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.

[David Randolph]

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» 

The plan is to continue holding SOHU, whatever happens.