Weekly thought on $CARA, $IBIO, with special emphasis on $KGJI

Last week, per my book, I postulated that a weekly spinning top bar next to resistance (downtrend line) increased the probability of a bearish momentum.  This week correction confirmed this probability.  Now, I’m going to postulate that there are two time-frame supports that are going to increase the probability of a market bounce next week.

SP-500_Daily

Let’s start with the daily time-frame. From the daily SP500 chart above, price is now getting near the 79 & 89 MA support lines.  Per my book, the 79 & 89 MA supports are powerful support lines on their own that provide a base for bouncing action.  There are also a Fib retracement of 23.6% (see yellow circle highlight on the left side) as well as a double-bottom chart-pattern (see the two blue up arrows on the right side) that act as supports.  Therefore, when you have three significant technical supports joining together to back up the possibility of a bounce, I’ve to say the probability of a bounce is pretty high.

The other time-frame supporting a bounce is the weekly chart.

SP-500_weekly.png

This one is as simple as having a weekly 15 MA (thick brown line) acting as support.

Having said all that about technical supports, the real wild card that may throw the stock market into turmoil is the decision of N. Korea to test or not to test its nuclear weapon this weekend. Thus, I’m still cautiously invested with 58% cash and holding core position size on $CARA only.  As a hedge, I also continue to hold $KGJI as my way of buying gold.

My 2 cents is that $KGJI (KIngold) is the most undervalued stock at the moment giving the current situation surrounding N. Korea.  Perhaps, due to Kingold need to revise their quarterly financial (for 2016) to break out the gold investment from their gold inventory in the book, skeptical investors sold the stock after the recent earnings conference call.  However, I see this as great opportunity to pick up cheap shares which I did.

Below is my personal interpretation and analysis of the balance sheet reclassification of gold investment and its related liabilities; therefore, here is a caveat: read it with the possibility of flawed logic.

Below is a cut & paste of the original 3rd QTR Kingold balance sheet:

KGJI_3rdQTR_BS

Per my highlight, you can see the gold inventories of $1.097 billions and a long-term loan of $896.97 millions.

Below is the revised 3rd QTR Kingold balance sheet:

KGJI_3rdQTR_RevBS

Below is the breakdown of gold inventories and the add’l liabilities as a result of the gold inventories reclassification:

Revised gold inventories classification
Inventories $164,560,088.00
Investment in gold – current $248,359,383.00
Investment in gold – non-current $1,181,039,779.00
Total Gold Assets $1,593,959,250.00
Add’l liabilities as a result of gold inventories reclassification
Gold lease payable – related party $438,340,470.00
Related party loans $149,920,542.00
Third party loans $37,480,135.00
 Total Add’l liabilities increase $625,741,147.00

To keep it simple, I ignored the minor changes in restricted cash and Other current assets and prepaid expenses.

What I really want to focus on the discussion is the total gold assets as a result of the reclassification. Since we don’t have the final December 2016 10K yet until coming Monday, I’ll go with $1.6 billions worth of gold assets as an assumption of December 2016 balance.

Now, take a look at the percentage increase in gold price for 2017 by using the SPDR Gold Trust (ETF) (NYSE:GLD) as a benchmark:

GLD_Yearly

As you can see on the yearly chart above, $GLD is up 11.85% for the year (see blue arrow at the top pointing to the 11.85% increase for the year).

Basically, my whole point of this reflection is that the market value of Kingold total gold assets for 2017 has increased 11.85% or $188 millions dollar in 2017 ($1.59 billions x 11.85%).  If everything remains the same (no change in gold asset in 2017 hence no change in gold liability), the increase in market value of Kingold total gold asset alone already exceeds its market cap of $82 millions @ $1.24 closing price.  This disparity will become even more extreme as gold price continues to climb higher with skeptical investors selling into $KGJI price rise.

Per recent conference call, Kingold management mentioned about conducting a roadshow in the U.S. in May or June.  I think it will be quite revealing if management can bring some affidavits or reliable official documents to prove their gold inventories and investments.

Basically, I’m betting that Kingold’s total gold assets are authentic and real.  And once proven to be real, I’m betting that market force will then accord $KGJI its true market fair value based on its gold holdings.  Yes, it’s a risky and speculative bet but the reward will be fabulous if I get this one right. Btw, this is only a standard size bet.

Meanwhile, take a look at the $KGJI weekly chart below:

KGJI_weekly

This week reflected a solid bullish engulfment bar with strong volume.  The probability of more rally to come is high from a technical standpoint that also included a Fib retracement 78.6% support.

Regarding $CARA, I was quite surprised  to see the relative strength of $CARA kicking off the week on Monday that I even added more trading shares to the position. Unfortunately, after Tuesday small up day, the weight of the uncertainty in the global tension began to affect $CARA that I decided to unload my trading shares on Wednesday mid-day and then the rest of my core position later.  Giving that I already anticipated a bearish momentum on the SP500 the week before, it wasn’t hard for me to clear out my $CARA position as well as my other stocks ($PI and $AMRN) from my portfolio.

On Thursday, $CARA dropped below $18 and I began to start looking to buy back my core position.  I finally got some when price started to bounce off the lower band of the opening range.  Although price fell below the lower band of the opening range near the close, I decided to hold on to my position in case of a bounce comes Monday.  If the world tension is relieved over the weekend, I expect to witness a furious market rally and that $CARA will bounce back above $18 before you can blink your eyes.  However, if world tension continues to mount, I’ll probably reduce my core position looking to buy back cheaper to lower my average cost.

CARA_weekly

From the weekly chart above, despite another down week, the overall price trend is still bullish based on the fact that price is still inside the top layer of the Andrew Pitchfork three parallel trendlines .  I see strong support at the $17 level.  Let’s see what Monday will bring.  Of course, fundamentally speaking, I’m very bullish ’cause I’m betting that  Cara Therapeutics’ CR845 drug will work wonder on the coming two painkiller trial results to be released by end of June.

Without a doubt, I’m still very bullish on $IBIO.  I’m betting that Dr. Carol A. Feghali-Bostwick’s discovery on fibrosis treatment is still alive and well and is just waiting for whatever they’re waiting before moving forward.  Everything else is just noise. Watch the video again.

Due to my getting out of $CARA on Wednesday before dropping below $18 on Thursday, I was able to prevent much bleeding from my large position. And with rally on $KGJI, my port is able to gain slightly for the week.

Current positions:

Main port (no margin): IBIO  CARA  KGJI  and 58% cash. (up 4.5% YTD)

Trading port (with margin): MENXF IBIO

My 2 cents

From my camera:

058



Categories: Daily trading Journal, trading journal

Tags: , , ,

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