I should have skipped the cup with handle with CTRP in 2005 and bought the 200-day moving average trend buy.
Back on August 23, 2005, I wrote a case study on Ctrip.com Intl. (CTRP) while the stock was trading at a pre-split adjusted $53.57. I knew Chinese stocks were something to watch in the future, especially after the huge speculation runs of SINA and SOHU; so I took a position. Problem is, I took the position on the cup with handle breakout but was later forced to sell based on a sell stop and never caught the entire run (the market was shaky at the time).
CTRP is one of the reasons over the past couple of years why I have minimized buying cup with handle breakouts and search dearly from 200-day moving average trend buys. Later in 2005, when I was forced to sell, the stock held support at the 200-d m.a. and never violated the long term average. This was the ideal trend buy for the young growth type stock. Instead of buying in 2005, I was selling. Now in 2006 and 2007, I do the opposite. I watch others buy the breakout and I enter my positions closer to major support areas such as the 200-d m.a. CTRP was one of the original high fliers from the Chinese market but several new faces are looking to take off, including MR which I highlighted yesterday.
I am reading a pamphlet from Investment U, titled Profit from China by John Wiley & Sons and it’s not bad. I found the quote by Jim Rogers (co-founder of the Quantum Fund) to probably be accurate:
“The nineteenth century belonged to Britain. The twentieth century belonged to the United States. And the twenty-first century will belong to China”
Past Blog Appearances by CTRP:
Ctrip.com (CTRP) Updated – 3/15/06
Tuesday’s MSW Daily Screen – 11/15/06
Here is some of the research from the case study I performed back in August 2005:
8/23/05
CASE STUDY – Cup with Handle Setup
CTRP – Ctrip.com Intl ADS
Leisure Services – Transportation
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
Here are some Updated Numbers from 2007:
3-Year Net Income: 150%
3-Year Sales Rate: 75%
ROE: 32%
EPS Analysis:
2005: 0.86
2004: 0.51
2003: 0.03
Revenue: (in millions)
2005: 67.18
2004: 40.32
2003: 20.91
Net Income: (in millions)
2005: 224.0
2004: 133.0
2003: 53.8
Number of Institutions (last reporting period):
Total: 60% Holdings
Money Market: 88
Mutual Funds: 158
Other: 11
As we can see, 67 new money mangers own the stock, 142 new mutual funds own shares and 10 other institutional holders have grabbed shares since my case study in 2005. This explains exactly why the 200-d m.a. held support at each challenge over the past two years.
This is basic common sense!
Thanks for the post on CTRP! I will have to find that article from Investment U. I am a big fan of the China stocks and would be interested in reading it.
Thanks, Chris, for all you do here! It is really terrific when someone like you with experience and knowledge helps out others like myself to learn and improve our bottom line in the stock market.
Kudos!
🙂
Trading Goddess,
Once I find reading the piece, I will hand out a link. I don’t like to fully recommend anything until I read it finish to end.
CTRP was a great learning experience for me and I appreciate that you enjoyed the post. It was worth it to take the time to write the post if it only helps one person!
I got to disagree with the idea that traders should skip the cup with handle. With so much research and back studies that demonstrate that it is the most powerful pattern I found it odd you would put it aside based on the price action of CTRP. The learning experience should be that not all break outs work and that you should be looking to get back in a stock, because the 2nd set-up tend to be higher probability trades. Also, the 200ma is not as important as the 50ma as an area of support. I encourage you to look at the work done by Greg Kuhn on cup-completion cheats. That may give you a working basis to help you get into patterns in an area that allows you to deal with the fluctuations in price and not get stopped out.
Maybe I should have been clearer: I should have skipped the cup with handle for CTRP (not all stocks). I teach the cup with handle on the education portion of http://www.MarketStockWatch.com. I am not eliminating my research to exclude cup with handles.
However, the 200d m.a. is more important that the 50-d m.a. for support when trend trading long time frames than a few days or weeks. This is where we disagree.
Read more about how I trade to understand that I have studied and used cup with handles for about seven years. It’s just that 200-d m.a. trend buys have been more profitable to me over the past 18 months. Markets change and not all patterns work at all times.