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Volatility is back for China stocks

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economy_5Dec. 10, 2009 (Chinavestor) Mixed trading on Wednesday left most China stocks relatively unchanged but the following China ADR list is worth a closer look: Suntech Power (NYSE:STP), Solarfun Power (NASDAQ:SOLF), Focus Media Holdings (NASDAQ:FMCN), General Steel Holdings, Inc. (NYSE:GSI), Silvercorp Metals Inc (NYSE:SVM), Spreadtrum Communications, Inc. (NASDAQ:SPRD), KongZhong Corporation (ADR) (NASDAQ:KONG), China Telecom (NYSE:CHA), Aluminum Corp. of China (NYSE:ACH), American Dairy, Inc. (NYSE:ADY), Agria Corporation (NYSE:GRO), E-House (China) Holdings Ltd. (NYSE:EJ), Xinyuan Real Estate Co., Ltd. (NYSE:XIN), and Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE).
Let's start with momentum stocks. We took a note of China Infrastructure Investment Corp (NASDAQ:CIIC), a low volume small market cap China play, yesterday and the stock continued to rise. CIIC has advanced 33.6% in the last three days with increasing volume, suggesting you haven't missed all the fun just yet.
General Steel Holdings, Inc. (NYSE:GSI) has been extremely volatile in the last 30 days but most advances were accompanied by heavy volume, a very bullish sign. This stock isn't for the faint hearted but looks like a high risk/high return stock.
Focus Media (NASDAQ:FMCN) experienced very heavy volume and rose 7.5% on Wednesday after reporting 2009 Q3 results. Despite a strong showing the stock is not overbought yet, as the following indicator suggests. This in turn is a bullish statement for FMCN.
Silvercorp Metals Inc (NYSE:SVM) advanced 5.7% on Wednesday but it looks more like a dead cat bounce at this point after falling 15% in December. But pre-market trading suggests SVM is going to have a good day - but this just might be a temporary bounce. With a limited market history SVM is really a dark horse at this point.
Spreadtrum Communications, Inc. (NASDAQ:SPRD) has a very impressive 12% run in the last three days. But this stock is another extreme when it comes to volatility as the 50% up and down swing in the November 16-19 period testifies. Another high risk/high return stock.
Suntech Power (NYSE:STP) and Solarfun Power Holdings (NASDAQ:SOLF) top the most overbought China stock list, but it is important to notice that technically they're not overbought. Remember that a security is sometimes considered overbought when the stock is trading out of its trading envelope and is approaching the theoretical high. Looking at the following chart there is still room left to go for STP and SOLF before they became truly overbought.
Most overbought China stock list
Looking at the most disappointing China ADR list from Wednesday, American Dairy, Inc. (NYSE:ADY), Agria Corporation (NYSE:GRO) and E-House (China) Holdings Ltd. (NYSE:EJ) top the list. American Dairy fell 4.6% just Wednesday but is off 9.1% in the last five trading days suggesting more downside is on the table. Agria Corporation (NYSE:GRO) has a very similar trading pattern with a 3.8% fell yesterday and a 7.5% decline over the last five days.
E-House Holdings (NYSE:EJ) is different tough because the stock just touched $22 earlier the month but failed to establish support at that level. Based on the volatile nature of EJ in the past a 5%-10% price swings are always  a possibility.
Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE) fell 3.4% on Wednesday but is is due to her volatile nature then to a fundamental weakness. The Chinese solar sector have been the best sector following 2009 third-quarter earnings but are now taking a breath with YGE being one of the first ones to do so. But expect China solar plays to outperform for the next 3-5 months.
KongZhong Corporation (ADR) (NASDAQ:KONG), China Telecom (NYSE:CHA) and Aluminum Corp. of China (NYSE:ACH) are interesting because they have experienced a sharp decline in the last  week, making a technician to believe that these securities are oversold.  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.
Most oversold China stock list

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