As I alerted TIMalert subscribers with 30 minutes to go before the market close on Friday, I bought 1,500 shares of China North East Petroleum Hldng Ltd. (CNEH) at $4.60—mainly because it’s the single most perfect breakout chart pattern I’ve seen in a very long-time (was considering buying ShengdaTech, Inc. (SDTH) on its own meaningful breakout above $10, but that move was too quick for me.)
And that’s just the beginning of the story (I always do research ahead of time as this popped up on my watchlist two weeks ago)
I bought so early (usually wait til 5-10 minutes before the close if I’m buying for a next day move) because a.) it was breaking out to a new daily high (solid close, but wish it’d taken out $4.70) b.) since its an OTCBB play, executions are slower and c.) no matter what time frame you look at, it’s breaking out on all of them—10 day & 1 month (break above $4.50), 3 month (break above $4.69…close enough aka I’ll risk Monday buyers making this into a truly perfect breakout) and most importantly, 1 year/all-time, above its late 2007 highs of $4.55 (uhhhh can you say massive massive massive massive cup and handle pattern?)
I mean this chart is just gorgeous—it’s the kind over which boys fawn and post up on their walls. The kind they get embarrassed for their mom to see so they hide it under their beds. This is an absolute stunner so I really think there’s 50 cents-$1 of immediate upside (especially given Friday’s 40 cent morning spike into resistance aka imagine how much it can spike when there’s no resistance aka Monday, probly Tuesday & Wednesday, maybe even Thursday too), probly more, but I’ll be out after 1-2 days (I’ll try to hold, seriously, but you know me!)
You see perfect technical breakouts like this have a tendency to make even the most gradual movers into true spikers. Look what happened to I-never-move-more-than-10-to-20-cents-per-share-per-day Challenger Energy Corp. (CHQ), which has now spiked nearly $1.50 in 2 days after performing a perfect technical breakout just above $5.
How eerily similar is that CHQ chart to CNEH? And CNEH has proven it likes to spike 2-3 days in a row, so Friday is just the first day….not to mention it was on high volume (hugely hugely important, but I’m willing to bet Monday’s volume is gonna make Friday look weak)
Perhaps more importantly, you gotta remember, even though CNEH has been a slow mover the past few months, its really just been consolidating gains since its last spike, which was a monster runup from 50 cents to $4.50 in less than a month and a half. Oh yes, this thing can spike so I wouldn’t count a parabolic spike out AT ALL…double digits in July might sound crazy, but this is only a $90 mil company so it’s definitely possible this thing could make a PDO/XC/FPP-like runup (all were sub-$100mil marketcap plays).
And, it’s not just a technical playtrade of the year, if you wanna see all the amazing fundamental research, see their latest earnings report:
– 1Q08 Revenue Increases 476% to $10.8 Million –
– 1Q08 Net Income Increases 1,052% to $3.3 Million –
Yup, mind boggling growth and that was then oil prices were much lower.
Even better, THIS Seeking Alpha article is surprisingly thorough…after you read it, it’s gonna be tough for you not to wanna buy shares of CNEH on Monday (those of you who already have shares, definitely spread that and this blog post around)—it’s all about building a case for your position and the variables here (oil is so hot, this company looks cheap, chart is an IDEAL breakout, forthcoming events could make this thing really surge, etc.), make your job easy—so just get the story out there so everyone sees how good this is looking right now.
(Obviously you gotta disclose if you’re long, but often times these things become self-fulfilling prophecies so the main problem is having the patience to wait as you’ll be tempted to take your profits too soon aka welcome to my life)
Best of all, that Seeking Alpha article is from early May so the models assume oil at around $100. For those of you too lazy to read, the guy thinks this company can do $1/share in earnings this year and $2+ next….factor in oil here at $140 and you gotta increase those estimates waaaaay up so the PE goes down to the single digits…with even more ridiculous growth.
OK, this is all well and good as it can and possibly will lead to a PDO/FPP/MXC Supernova here (seriously, all variables considered, you gotta believe chances of a parabolic move are over 25%), but what also caught my eye in that article was this statement buried waaaay down:
“Move from OTC to AMEX or Nasdaq before February 2009. Typically, this would be preceded by appointment of additional board of director members. Look for BOD appointments in H2 ’08 and expect move to main market about 3 months thereafter.”
Guess what—in late May, they added those directors as you can see right HERE. So, it’s already been a month, we should expect a move to a big exchange in the next 2 months…uhhhh, can you say anticipation buying?
To summarize, this company has everything going for it, ideal breakout chart pattern (all it’s gotta do is gap up 4 cents to be truly perfect), a proven history of exponential gains within a few weeks, the right sector, mind-blowing earnings/revenue growth, predictable upcoming positive news, competitors that have proven exponential gains can occur verrrrry quickly…in short, it’s the best trade setup—long or short—I’ve seen this year and I’m proud to be long.
PS Even if somehow it fails to breakout past $4.69, this thing has been basing for a while so the downside risk might be 20-30 cents…upside of multiple $/share + limited downside = solid risk-reward ratio.