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Revenue Guidance Hurts China Stocks

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decline_7(Oct. 27, 2009 - Chinavestor) The 104 points fall in the DJIA on Monday took a toll on Chinese ADRs. But the biggest bang is Baidu.com (NASDAQ:BIDU), China's search engine giant, whose shares are trading -$57 or -13% lower in pre-market trading after weak Q4 revenue guidance. This dramatic drop in share price altered our traditional oversold monitor to reflect on Chinese stocks that experienced the most dramatic contraction over the course of five trading days. As the following chart testifies, BIDU is only the sixth Chinese stock in terms of a relative fall, while Sohu.com (NASDAQ:SOHU) and E-house Holdings (NYSE:EJ) top the list.

 

China stocks with the largest relative loss for the last 5 trading sessions

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Looking at the same stocks from an oversold point of view, Baidu.com is not oversold despite the heavy loss! Sorting the Chinese stock universe from oversold point of view,  Sohu.com (NASDAQ:SOHU) is clearly the most oversold china play today. Shares of Sohu.com fell 16.02% on Monday after weak Q4 revenue guidance - the same reason that punished Baidu.com (NASDAQ:BIDU) beyond expectations. At this point Sohu.com is more likely to bounce back or experience a technical correction, at least in theearly hours of regular trading.

New Oriental Education (NYSE:EDU) is at the lower end of her trading envelope that happens to be at the theoretical low point as well. But EDU is not a one day weakness stock, but is trading at the low end since Oct. 20, following lower revenue guidance for 2010. (That darn revenue guidance is responsible for the fall for Baidu.com (NASDAQ:BIDU) and Sohu.com (NASDAQ:SOHU) as well - investors better pay close attention to this measure from now on)

Chinese solar companies continue to show weakness. Suntech Power (NYSE:STP) has been steadily eroding over the week, but China Sunergy (NASDAQ:CSUN) is the most oversold solar play - with the highest chances to turn around.

China Eastern Airline (NYSE:CEA) is a stock you want to pay attention to. When oil is coming off highs, CEA and other Chinese airliners are on the rise, simply because fuel cost accounts for most of the costs for CEA and ZNH. considering that china Eastern Airlines (NYSE:CEA) managed to stay in the black in Hong Kong on Tuesday, a feast that only 3 other NYSE cross-listed China blue chips were able to pull out, expect CEA to have a good day on the NYSE today.

Most oversold China stock list

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The overbought stock list is less active today thanks to the 104 points fall of the DJIA. Yanzhou Coal (NYSE:YZC) continues to show strength following the successful acquisition of Felix Resources off Australia. Yanzhou Coal H-shares (HKG:1171) managed to stay in the black in Hong Kong as well.  considering that only China Life Insurance (HKG:2628) (NYSE:LFC) and China Eastern Airlines (HKG:0670) (NYSE:CEA) could pull such feast on Tuesday, expect Yanzhou Coal (NYSE:YZC) to do well on the NYSE today. Shares of 54job Inc. (NASDAQ:JOBS) popped for no apparent reason.

Most overbought China stock list

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Overbought A technical condition that occurs 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 above. A sharp advance from $15 to $30 in 2 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 and is approaching the theoretical high. 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 too fast and might be due for a pullback.

Oversold A technical condition that occurs 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 above. A sharp decline from $30 to $15 in 2 weeks might lead a technician to believe that a security is oversold. Or, 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 too fast and may be due for a reaction rally.



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