CPF – Anand’s Technical Take
Ken gave you a fundamental and structural take on CPF (Central Pacific Financial) but now I’m going to talk in technical terms about its PRICE.
Like any other asset, stocks move on supply and demand and we can measure this by simply looking at price and volume. Once you know a company is a good company, your sole objective should be to see how to make a decent profit out of that belief. Nothing else! We need to 1) enter properly 2) time properly and 3) exit properly. A study of supply and demand will tell us this, so let’s check this out for CPF.
The stock is trading at $2.72 (as of Sept. 15 close) which is some 85% off of its 52 week high at $22.49. This stock is ODDLY DETRENDED from the overall market and even from region banks and financials more generally. In other words its price action is not following the overall broad market. While the entire world nearly bottomed at the same time in March, this stock didn’t reach its low until July 27th! at $1.78. From that point it has RALLIED in about 6 weeks to $2.72 which is a rally of 54%! Such short rallies can be due to short covering but without looking at the reasons lets see if the stock has turned the corner or not in the below chart, courtesy of StockCharts.com:
It cleared its very important 50 day moving average of 2.65 and did so on 3 to 4 times average volume. This is an excellent sign and what you would want to see in any breakout. There is near term resistance at around 3.20 . If it can clear that level and then take out 3.55 its off and running to 5.50!!! at least. If you are in the sotck you can take some profits (and keep a little bit long) at each of those levels and then buy with confidence a position back after seeing it re-establish a base (support) at the 3.50 level. A “base” is formed when a stock reaches a level, exceeds it and then corrects down to around the breakout point but does NOT fall below it. I would like to see the stock hang around and form a solid base (i.e. buyers) in at the 3.50 ish level for a few weeks. This will allow the 50 day moving average squiggly line to flatten out and turn upward.
Currently at $2.72, the risks are even weighted between a breakout to that level or another breakdown. Why might there be a breakdown
Its hitting its downtrend line from May, the weekly chart (not shown) has a 40 week moving average pointing down which the latest run has not cleared. So on a longer term timeframe, CPF is still in its own private bear market.
The risk is at todays low print of $2.19. If it closes below that EVER, then look at $2.15. Don’t let it get that far, I wouldn’t. I would be out at $2.20! If it breaks $2.15 on the downside then its headed back into the toilet at a buck and change. You’re better off buying a cup of Starbucks or a can of Pringles(r).
What of volume then? While the volume on the 15th was impressive, the recent few months have shown an even number of really bad high volume down days and good high volume up days and an inconclusive pattern overall. The short interest is very high on this stock so a rally on technical terms above the mentioned levels could light a fire under the stock. But if it breaks down at $2.20 just sell it and move on.
My own technical analysis agrees with your overall analysis but most recent pattern of lower highs on rallys and lower lows on selloffs would have me more cautious and raising the stop loss order to the 2.35-2.40 range just above the high of 9/11. The selloff of today (9/17) with lower volume and it’s ability to hold its 50 day MA was an encouraging sign. I also agree that the huge short position should act as an accelerator as stock moves higher especially if it breaks the 3.50 area. Let’s hope for a Happy Breakout and not another disappointing breakdown!!!