Wednesday, June 5, 2013

JOBS: Bullish on China's Monster

51job Inc. (JOBS), in breaking above its 20-day price channel, also challenged the prior peak in a correction from its all-time high, $69.80, set in July 2011. The present bull signal, then, is part of an attempt by JOBS to reverse a downtrend of two years standing.

Altogether in two days JOBS rose by 9.5%, without any English-language news to buttress the dramatic price move. But the stock is an ADR of a Chinese company, so much of what drives the price will be invisible to U.S. traders.

The key level is $63.95, attained in April 2012. Tuesday's high, $65.58, neatly broke above that level, but in trading today the price pulled back to as low as $63.36 with three hours left before the closing bell. The price remains above the price channel, so the bull signal is intact.

This is the second bull signal since JOBS' present trend, a leg up within a downward correction, began in August 2012 from $34. The two completed bull signals were both successful, yielding 10.6% on average.

JOBS was one of two symbols that survived the initial screening posted last night in "Wednesday's Prospects". The other, CTXS, failed to confirm its bear signal by rising back within its 20-day price channel.

51job, headquartered in Shanghai, uses print publications and its website to match workers with jobs, sort of a Chinese version of

It is covered by fewer than a handful of analysts, so there's not enough opinion to calculate an enthusiasm index. All I can say is that analysts are more positive than not.

The company reports return on equity is 17% with no long-term debt.

51job has been profitable for at least the last 11 quarters. The last quarter reported showed lower earnings than the comparable year-ago quarter. The company has surprised to the upside eight times, and to the downside, three.

Institutional ownership is extremely low, at 26%. The price has been bid up to where it takes $8.04 in shares to control a dollar in sales.

JOBS on average trades 92,513 shares a day. That relatively low liquidity supports only a modest selection of option strike prices, with open interest mainly in the single digits and a 29.6% (!) bid/ask spread on front-month at-the-money calls.

The options fail big-time to meet my criteria and the only way I would trade JOBS is through long shares.

Implied volatility stands at 34%, at the bottom of the six-month range. I has been tracking generally sideways since early March.

Options are pricing in confidence that 68.2% of trades will fall between $57.80 and $70.23 over the next month, for a potential gain or loss of 9.7%, and between $61.03 and $67 over the next week. The volume on options is running 39% above the five-day average for calls, and 33% above average for puts.

The fair-price zone on today's 30-minute chart runs from $63.55 to $64.27, encompassing 68.2% of transactions surrounding the most-traded price, $63.81. Except for a fast slide in the first hour of trading, the price has traded almost entirely in the zone.

51job next publishes earnings on Aug. 5.

Decision for my account: Were it not for the lack of option liquidity, this is a trade I would consider taking. Out of caution, I might wait for a close above the prior swing high, $63.95, before opening a bull position.

However, in light of the bearish bias that has taken hold of the markets, I'm not interested at this point in bull positions that can't be hedged using options. So I won't be opening a position in JOBS.


My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

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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