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China Drugstore Chain Company Set to Bounce.
In early April, China Nepstar Chain Drugstore Ltd. (NYSE: NPD), a retail drugstore operator in the People's Republic of China, began a downwards spiral that would eventually result in a 52-week low share price of $3.03. During this period, the company's stock price tumbled nearly 60% as the company revealed discouraging year-end 2009 and 1st quarter 2010 financial results. Nonetheless, the company reported expansion with the opening of 206 new stores in the past two quarters. They attributed the shortcoming in Q1 2010 profits to expansion expenses. Less than two weeks ago, the company reported the resignation of Mr. Wade, formally CEO, and assigned Nepstar's COO, Mr. Jason Xu, acting Chief Executive Officer. Mid-way into the month of June, shares of China Nepstar Chain Drugstore Ltd. (NYSE: NPD) look to rebound off a potential bottom. The appointment of a strong leader as the full-time Chief Executive Officer of the company may act as a catalyst in NPD's market and lead to a significant recovery in share price. For investors at these levels, that may mean an attractive return-on-investment (ROI).
Fundamental OutlookÂ
At the present time, the company's $345M capitalization poorly reflects the market share growth China Nepstar Chain Drugstore Ltd. (NYSE: NPD) has seen quarter-over-quarter. The company is listed at a price-to-book ratio of 1.38, has cash reserves of $167M, no debt, and boasts an attractive low float consisting of 27M shares. Add an 8% dividend and you have value investors scrambling for whatever shares they can grab a hold of, at these attractive prices.
Technical Perspective
On the other end of the spectrum, technical traders are positioning themselves for what may become a stunning 'bounce play'. Shares of China Nepstar Chain Drugstore Ltd. (NYSE: NPD) jumped $0.24 or 7.92% on Friday after over 770,000 shares traded during the session. The abnormal volume helped the price break past several resisting marks, including parabolic SAR, which now points to an uptrend.
Other technical indicators, Full Stochastic, Money Flow Index, and the Relative Strength Index point to a potential bottom and reversal in trend. Another technical pattern referred to as 'the pincher' formed as the PPO and ADX indicators showed divergence (separation), a signal that the price is likely to see further upside.
Above all, the jump in buying volume suggests a trend reversal imminent.
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