Wuhan General: Stock Worth Noting from the 'Chinese Boneyard'

As you know, I am an intrepid picker in what I call the Chinese boneyard of stocks. FINVIZ currently lists 154 China-based stocks. Pink Sheets lists 145 that trade on the pink sheets.

I own this symbol: WUHN, Wuhan General Group. I wrote about them first here, on October 21, 2009. I bought them because I liked the chart, and I liked the space that they were in. Here's a current chart through EOD Friday:

(Click to make larger/clearer)




As you can see, it had quite a pop on Friday--this is precisely the type of activity I would expect using this chart pattern.

I found this stock doing my low volatility scan. I liked the volume patterns, and I liked the "space" that the stock was in. However, because of EXTREMELY low float, it is a speculative stock at best. They also report on November 17, 2009 BMO. This type of chart pattern (low volatility, constructive volume, and basing) has been a successful chart pattern for me. I believe that the basing makes for a low risk entry. However, it is important to determine what you plan to do into the spike--I want to hold this longer term. I did not sell. But as a trade, I believe that selling into the volatility nets you a nice return. And there is always middling ground: sell part into the spike, and wait for volatility to collapse (if it does) and re-enter.

Author's Position: Long WUHN.

Comments

[User 488737:]

ANY STOCK with a market cap of just $60 M, and a DEBT LOAD of $28 M - with only $2 M in the bank - is far more than just a risky stock...it is a company that must be on the brink of bankruptcy, as it owes 1,500% - yes, that's 15 times - the money that it has in the bank....

This SHOULD be a penny stock - and I believe it will be...it was at $5 a year ago - and now is at less than half of that - and trades a scant 25,000 shares a day...

it's highly likely that it will report a loss in the next reporting period. I would not go near this company...

Nov 15 11:52 AM

[Leisa:]

User 488737: Thank you for your comments. WUHN is very much a speculative stock, and I noted such.

Regarding the 25K shares per day. I allowed myself to get shaken out of a stock because I was concerned that it traded less than 20K shares per day. It was a space that I was "early" in--a sector not talked about by any. That stock? TNA.

Whenever we enter an position--whether for a trade or an investment, we have to be clearly aware of our risk parameters and decide accordingly. WUHN was a technical set up for me, and it responded as I expected.

Nov 15 03:41 PM