Friday, January 20, 2012

CTBI: Icebergs on the chart

Community Trust Bancorp Inc. (CTBI) is a Pikeville, Ky. bank holding company that provides the usual suite of bank holding company services. The company is highly ranked by analysts. Web chit-chat says insiders have been buying shares. It is expansionary, having bought another bank in the last year. Earnings are up.

Basically, CTBI is a well managed bank that is participating in the recovery of the financial sector, and traders think will benefit further as the rest of us catch up to the money.

CTBI was one of 21 stocks added to Zacks' top rank today, and my analysis found it to have the best bullish chart of the lot. (See my essay "10,000 Charts" for an explanation of my screening methods.)

BAM came in 2nd, followed by TRGP at 3rd and LMCA at 4th.

CTBI, like all other stocks, peaked in 2006. But oddly, when the Great Recession ground more innovative companies to new lows and into the muck, CTBI retraced a mere 61.8% of its preceding six-year rise, pausing at that Fibonacci level.

It has since made a run up to the 23.6% retracement level, falling short at a peak of $37.17 in January 2009, and since then has gone basically nowhere.

But, it has gone nowhere with grandiosity, in a series of wide swings, and what is happening now on the chart is the most recent upward swing.

The current rise began in early Oct. 2011 at $22.28, and carried up, with a five-week sideways pause, to today's high (so far) of $30.89. The price has pushed above the most recent prior peak and now is preparing to challenge the April 2010 peak of $31.56. The next peak before that is $37.22 in late December 2008.

CTBI going forward can best be seen, I think, as a series of breakout attempts. If it fails to push above each peak set in its long, zig-zaggy course, then it's time for the trader to heed the chart and exit, post-haste.

That's a long way of saying: This is not a chart that I love.

I'm not alone. Institutional ownership is only 45%, way low for an up and comer.

However, return on equity is 11% -- respectable -- and the debt/equity ratio is 0.59 -- not horrifying.

And traders have bid the price up to 2.66 times sales per share. So, someone out there clearly has high hopes for the future.

To summarize, CTBI offers you the chance to pay triple the sales value for a moderate return on equity and a sort of highish level on debt in a small banking company, unaccompanied by a mob of enthusiastic big-money managers. Plus, average volume is 38,000 shares, and it has no options.

Hey, what's not to like?!?

CTBI next announces earnings on April 20. Its quarterly dividend, at 4.02% per annum, is due in March.

Decision for my account: I love Zacks, but this stock looks like a faith-based play, and I don't love Zacks that much. The low volume, the lack of options, the high price/sales ratio, and the previous resistance levels lined up like icebergs during the long zig-zag movement -- all feel to me like a Titanic moment in the making. 

No trade for me at this point. A break above the April 2010 peak -- $31.56, or 2.4% above the present level -- might cause me to reconsider. If I were a very long term trader, then I would think about stashing some CTBI in my hope chest. But my higher velocity approach means I've got better uses for my trading funds.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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