We have always prided ourselves by providing unique
fundamental analysis of U.S. listed Chinese stocks. These reports are
aimed at the Professional level subscribers though we post some of the
most intriguing ones for sale to the general public on the website.
The
benefit of in-house fundamental analysis became evident when we have been
picking a “Stock of the Month” or we’ve been updating both growth and
conservative portfolios in the Newsletter, or the “Weekly Stock
Recommendation” list for our “Advanced” subscribers. The track
record of such services are outstanding. View the “Track Record” page on
the Chinavestor website for the latest updates.
Moreover,
our Newsletters focus on
fundamental analysis that fills up an information gap that is not
available elsewhere. Let me highlight the latest issues that captured
fundamentals such as money flows, liquidity, risk, reflections and such.
Based on feedback from our subscribers, we understand the need for
technical analysis. For this reason, this issue will detail three of our
pure technical reports updated on a daily basis and are available to our
“Advanced” subscribers.
The
first one, called “Pre-Market Report”, features a short market
summary coupled with the most recent news. This structure gives traders
what they need to know before the bell.
This
report consists of four segments: a short summary of yesterday’s trading
in the U.S. markets with a Hong Kong overnight trading update; a section
with the most relevant stock and market specific news; a section with
institutional buying/selling interest; and a technical summary of the U.S.
listed stock universe.
The
second indicator, called “Overbought / Oversold” Report”, is
looking for stock extremes that offer trading opportunities. This short
term indicator gives traders a chance to look at the whole stocks universe
and assess which stocks look interesting for trading purposes. This report
displays stock specific trading ranges, direction for each individual
stock and puts current moves into perspective. Use of this tool will be
described in the second part of this Newsletter.
The
third report, called “Cross-listed Blue Chips Report” takes
advantage of the phenomena that prices of U.S. listed Chinese stocks
follow their Hong Kong listed counterparts.
The correlation between Hong Kong
and U.S.—either NYSE or NASDAQ—listings are very close and is almost equal
to one. Considering that for most U.S. listed Chinese companies, Hong Kong
is the home market; following Hong Kong trading is more than essential.
Our third report is accomplishing that, enabling traders to anticipate
U.S. opening price with acceptable accuracy.
By
definition, the “Chinavestor Daily Pre-Market Report”, above, is
designed to give traders a summary of the markets, capturing the most
relevant news and investors activitywith a comprehensive technical look at
the market as a whole.
This
report is published on the website each morning by 9 A.M. eastern time
under the “Stock Analysis” tab under the Chinavestor menu. As such, it
delivers a short summary of yesterday’s Chinese ADR and Hong Kong Stock
Exchange (HKEx) trading, highlighting the index and stock components that
have moved significantly up or down. This information is located within
the Market Performance section on the top of the report.
The
News section is typically stock specific and market oriented in
nature. They are updated in the morning to deliver the most relevant facts
to the subscriber’s desk.
The
Significant Corporate Actions section is designed to give traders
an idea of what the institutions (e.g. shareholders that move the stock)
are doing. The Hong Kong Stock Exchange provides us the most up-to-date
information by sending us a note at the time a significant share
transaction takes place. This notice is checked and if relevant, we
incorporate the information within the report. The best use of this
information is that if we see an accumulation of shares of a specific
company, we predict it indicates significant buying power and that share
price appreciation is likely to follow. Following the same logic, we want
our subscribers to be aware that a significant selling is likely to result
in price depreciation.
And
finally, the Technical Measures section of this report looks at the
whole ADR universe and checks on technical indicators such as current prices vs. 52 week highs
and lows, stock prices vs. 20-, 50– and 200-day moving averages (DMA),
stocks with up and down volumes and a common measure called Relative
Strength Index or RSI.
The
second report we publish before the market opens is the so called
“Overbought/Oversold Report”.
By
definition, a stock is overbought when prices are considered too
high and susceptible to a decline. Overbought conditions can be classified
by analyzing the chart pattern or with indicators such as the one on the
right. A sharp advance from $15 to $30 in two weeks might lead a technician to believe
that a security is overbought. Or, a security is sometimes considered
overbought when the stock is trading out of its trading envelope (blue
stripe) and is approaching the theoretical high (OB). It is important to
keep in mind that overbought is not necessarily the same as being bearish.
It merely infers that the stock has risen too far and too fast and might
be due for a pullback.
We
regard a stock oversold when prices are considered too low and ripe
for a rally. Oversold conditions can be classified by analyzing the chart
pattern or with indicators such as the one on the right. A sharp decline
from $30 to $15 in 2 weeks might lead a technician to believe that a
security is oversold. A security is sometimes considered oversold when the
stock is trading below its trading envelope and is approaching theoretical
lows. It is important to keep in mind that oversold is not necessarily the
same as being bullish. It merely infers that the security has fallen too far and too fast and may be
due for a reaction rally.
You
may ask how to use the OBOS indicator.
Generally,
if the arrow approaches the theoretical low (OS) limit it is considered
bullish for the underlying stock. Conversely, if the arrow pulls back from
the OB position it is a bearish signal. Some traders identify the
long-term trend and then use extreme reading for entry points. If the
long-term trend is bullish, the oversold readings could mark potential
entry points.
The
definition of the stripes and arrows is that the point of the arrow is the
last price of the security; the base of the arrow is the stock price a
week ago. The blue stripe represents the trading envelope, a band, where
the stock has been trading in the last 50 days. The OB and OS positions
represent the theoretical high and low positions.
It is
best to use the overbought/oversold indicator to compare relative pricing
of cross-listed stocks. The
basic assumption is that over time, Hong Kong and U.S. listings of the
same security correlates virtually perfectly. Comparing relative
overbought and oversold positions of the same stock in different markets
reveals price asymmetry. We also have to keep in mind that the HKEx is the
home market for most of the foreign listed Chinese securities and as such
the U.S. listing tend to follow price changes that happened overnight in
Hong Kong.
First
we create the overbought/oversold diagram for all HKEx and U.S. cross
listed securities. Then we measure the size of the arrow; this is the
indication for big price changes. Again, the size of the arrow is a stock
specific number that reflects stock characteristics. For this reason, the
bigger the arrow the greater the price change. This method enables us to
filter out the biggest price movers that are out of sync from normal
trading bands.
Second,
we look at the position of the arrow. The closer the arrow is either to
the theoretical high or theoretical low position, the more interesting
that stock is. By comparing the HKEx listing’s arrow position to the U.S.
listing’s arrow position, we see a different angle how to interpret the
results the best.
Finally,
we compare the arrow position in the HKEx to the U.S. position. The bigger
the gap between the points of the arrow in the different markets, the most
likely the U.S. listing will follow the HKEx move.
The
second page of the Cross-listed Blue Chips report, that is not featured
here at this time, features all the HKEx and U.S. listings next to each
other allowing traders to look at the whole stocks universe all in one
glimpse.
For a
detailed description for definitions or questions regarding how to use the
reports properly, please don’t hesitate to contact us either by phone or
by e-mail:
1-203-463-9416
info@chinavestor.com
