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Monday, 26 February 2018
Creative Technology: 26 February 2018, Monday, 9.07am Singapore Time
26 February 2018, Monday, 9.07am Singapore Time (Click on Technical Chart above to Expand)
The following was my point of view in some sharings:
For Creative Technology, the market action is a speculation on the change to its fundamentals. If an entire sector, 90% of the companies are already overvalued, there can always still have 10% of companies that have innovation breakthroughs or some other breakthroughs and defy the industry valuation.
For instance if XYZ company in the tech industry suddenly discovered an A.I algorithm which can reliably forecast things such as human behaviour with precision, and can make a lot of money, this single tech company, out of a total of 2000 tech companies, can defy a trend within an entire industry and go 2 folds or 10 folds or even 100 folds up.
For Creative Technology case, the speculation on them was the realisation of '3D' sound to headphones after a US$100m R&D. Their Super X-Fi chip can recreate a customised listening experience. Assuming each chip costs $100 and it can sell 10m such chips a year, it will be $1 billion ($1000 million) returns a year.
This is why the market for Creative Technology rallied like that: a rally of more than +100% and holding this gain throughout the session to end with +130% gain.
As I have shared based on my past experiences, when a company is able to suddenly rally like that, of +100% in a single day, and hold on to all this gain throughout the day's session, and it is not a penny stock, it means the company has a drastic change in fundamentals. It often is able to rally 【at least】 another +100% or +200% in upside.
Whether it can rally more from there, i.e. rally more after another +100% profits, it will depend if the revolution is really a revolution and if the listening experience is really worth the money for the new improved experience.
We need to look for clues. There are 2 important clues that point to a new positive future.
1. "Since January, Creative has presented its Super X-Fi to headphone makers and the sceptical press - and received validation. Headphone manufacturers were blown away. They are willing to jump on the bandwagon, they know there's money here".
2. "The technology works so well that testers couldn't believe they were listening to a Dolby Atmos demo track on their headphones instead of an eight-piece home theatre system. Many would remove the headphones in disbelief and try to detect any external supporting sound."
Creative Technology: The shares soared S$1.63 to S$2.88, on a volume of 6.9 million as buyers latched on to what they hope would be a revival of Creative's glory days when it was the go-to maker of multimedia soundcards. Creative's share price had jumped over 130 per cent, adding over S$100 million to the Singapore soundcard maker's market cap in a single day.
What does this mean? This means that a mere maximum of $8.625 million dollars had been used to create a more than $100m jump in market capitalisation of the shares of Creative. This will induce shorting/selling pressure on Monday 26th February 2018 or at least some meaningful regression to a mean. If there is no selling pressure or that selling pressure is absorbed on Monday open, this means the smart monies in the market are currently judging that the 3D sound system's superchips are indeed good.
This will be added as my Top 5 Singapore Stock for Buys
(High Risk High Gain Stock; do your own due diligence) Bullish (Buy)