After reporting strong gains last week, the stock price of Kirin International Holding Inc (OTCMKTS:KIRI) declined more than 1% yesterday and closed the day at $5.00. It was very much expected as there was no evident reason for the recent price run in last week. Kirin is an OTC-traded firm based in and functioning out of China. The company has not issued any press release in last one month and the share price has been witnessing a rollercoaster ride since then.
The buzz
The original Press release that attracted investors’ attention and helped Kirin’s stock surge to $3 per share was issued on September 10. According to the PR, the company finalized a memorandum of understanding to purchase 100% stake in a company named “Wuhan Yangtze River New Port Logistics Co”. This firm runs a logistics facility on the Yangtze River, which is the longest waterway in China.
Deal terms
The agreement, should it ever materialize into something substantial more than a MoU, involves Kirin issuing 160 million shares at almost three times its current trading price, or $10 a share, to buy the company controlling the logistics center in a prospective $1.6 billion deal. There appears no logic behind such a decision and particularly behind the proposed value for the deal. Kirin had twenty million outstanding common shares as stated in last quarterly report.
The momentum
The big percentile gains from under $2 a piece last Monday to more than $5 recorded last week took place on almost no news or marginally promising materially based announcements from Kirin International. The company is currently gaining on vague excitement and that could reverse its way at any time in coming trading sessions. Yesterday’s decline which came on massive share volume of 178,375 compared to average share volume of 104,511 could be just the beginning of an ugly decline.
Kirin International Holding Inc (OTCMKTS:KIRI) has been in a strong uptrend over the last couple of months. The stock has been forming higher highs and higher lows which is indicative of the strong buying interest present at lower levels. The momentum indicators for the stock are in bullish territory and show no signs of a reversal which is pointing towards the fact that bulls are in total control. The relative strength index for the stock currently trends in the overbought zone but show no signs of a reversal which is a bullish indicator. Traders believe the stock could head to levels of $6.35
