Feb. 16, 2010 (Chinavestor) Small cap Chinese stocks are volatile - we knew this. So a +20% jump following better-than-expected earnings from China Precision Steel (NASDAQ:CPSL) this morning is not so shocking. Before investors get too excited, it is important to consider the following four factors that contributed to the 20% jump.
- Strong earnings, for one. The company reported a net profit of $2.6 million vs. -$2.0 million net loss a year ago. Top line grew by 53.7% year-over-year to $27 million. So both top and bottom line improved significantly - a very good sign on its own.
- "China's Iron Ore Imports From Australia Rose 42.9% in 2009, Xinhua Says China’s iron ore imports from Australia rose 42.9 percent in 2009 to 260 million tons and imports from Brazil rose 41.5 percent to 140 million tons from a year earlier, the official Xinhua News Agency reported, citing Chinese customs figures."
- Strong market sentiment helps small cap stocks - the DJIA is up 95.68 points or 0.95% following strong earnings of Barclays, Deutsche Bank upgrade and strong Japanese economic data this morning.
- The company has been experiencing a significant cool-off in the past six months, trading well below her 10-DMA and 50-DMA. Though the stocks was not technically oversold, it was ready to turn around in case a catalyst was present.
China Precision Steel Inc. (NASDAQ:CPSL) in the past 6 months
Had it been a weak market day, or data suggesting that China is cutting back on steel imports, or simply just a strong dollar would have pushed commodity prices lower for the day- I bet China Precision Steel (NASDAQ:CPSL) would be trading dramatically different today.
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