Perhaps a too easy pun on Cyprotex (TIDM: CRX) but all the same, it needed doing!
I have been long-invested in CRX since 2009 and I think it’s a nice example of an alternative investment market (AIM) company in which the fundamentals have dictated short term resistance levels this year as the company has become profitable with a view to growth potential, or it might just be a happy and convenient coincidence. The story begins in September 2011 and ends into April 2012, so the time length for evolution of this trend was well over 6 months and favoured the investor over the trader:
1. In September-October 2011, bullish divergences appeared in daily MACD, money flow, and ultimate oscillator.
2. The price rise from the end of October 2011 (2.75p) to the start of December 2011 (4.5p) resulted in a 9/100/200 day exponential moving average golden cross, followed by supportive bounces between January 2012 and March 2012, before the move from ~4p to 6.75p between 19 March 2012 and 12 April 2012.
3. The hourly Coppock curve coincidentally went positive during the final March-April 2012 price rise.
4. Bearish divergences in daily Chaiken oscillator, relative strength index, and volume for the peaks of 22 March 2012 (5.25p) and 12 April 2012 (6.75p), followed by a gradual price drop back to 4.125p into June 2012.
5. The full year results (to end of December 2011) produced an earnings per share (EPS) of 0.39p. Some research into EPS and its implications with respect to the share price to earnings (PE) ratio has suggested that a company is considered to be ‘fair value’ if the PE is in the 10-17 region. With an EPS of 0.39p, the fair value share price range for CRX inevitably becomes 3.9p-6.63p, which just happened to be the approximate price movement for CRX, after the results were released, between March and April 2012.
Obviously this is just one example where company fundamentals have appeared to dictate price movement, especially resistance to further movement up and I found this coincidence both insightful and exciting. It has also made me question how important the net asset value of a company really is in relation to the EPS once a company starts to become profitable.
Now for a blog hiatus thanks to the world, but I will return with more trends after they’ve happened!
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