Saturday, August 17, 2013

CCCR - A Perspective

I was asked by @easymoneyoc on Twitter about China Commercial Credit Inc. (CCCR). Here's what I think.

CCCR is in the business of providing business loans and loan guarantees to companies that have generally been prevented from obtaining such services from commercial and state-owned banks. CCCR offers services to these businesses that would under normal circumstances have to go through alternate measures to obtain credit.

The finance office of the Suzhou government in China will not allow any new microcredit companies such as CCCR to form, which could be good from a competition standpoint. Also, there is speculation that this stock IPO'd for the purpose of being acquired, as absorption of competition is a method of securing a higher market share. These are possible positives.

This Trading Floor article by Fredrik Oqvist has some interesting things to say about why the company began trading publicly. A quote from the page reads, "Now, this basically means that what investors have just done is give all the proceeds from the IPO to 16 individuals, and if they ever actually want it back their only option is to buy it back from these same 16 individuals. Doesn’t sound that brilliant." The article explains it much better than I could. The situation seems sketchy.

But I like technical analysis. The stock IPO'd with a float of 1.4M shares. The average volume in the past 4 days has been 1.25M shares which is 89% of the float each day. That's where all the volatility comes from. Here's a couple charts and what I think of them.

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CCCR Daily- Not much data to go off here as the stock only recently begain trading. Short 3 day uptrend broken on the fourth day. Thursday had a huge upper wick on the candle which is a bearish sign at the top of an uptrend.

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CCCR 2 Min - We get a much closer look here, from IPO to present. Wednesday had a nice break of the short term resistance set up on Tuesday (#1). Throughout the day, it formed a very wikkid triangle with nice volume on the spike up and lower volume on the consolidation. (#2). Thursday morning was just crazy right off the hop and formed short term support at $16, but the stock couldn't hold the gains (which is to be expected --> ~300% in 3 days? Sha, OK.) and tanked at the end of the day. (#3). There was now double resistance at $16 from the previous support turned resistance and the new downward sloping resistance formed from the day before. Friday it gapped open to this resistance and fell flat on it's face afterward. It found support close to $10. This also happens to be the low dip of the triangle pattern on Wednesday.

My take on the stock? Bearish short term, although I don't really have a crystal ball. Pay attention to the support ~$10 and shorter term resistance at ~$11 and then next ~$12ish.  Breaking of the $10 support level could send the stock back down to the $6.50 level. I expect the volatility to die down soon, as this high of a volume/float ratio won't be sustained.

Info also sourced from Seeking Alpha and Yahoo! Finance. Technical analysis is my own. I'm not recommending anything to anyone. 

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