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China stocks embrace earnings season

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obos-625-tumb(Oct. 12, 2009 - Chinavestor) Chinese ADRs have been on fire last week as the DJIA advanced to a 2009 record. Most of the action took place on the NASDAQ but a selected number of large cap NYSE listed China ADRs moved significantly as well.

Shares of China Automotive Systems (NASDAQ:CAAS) advanced over $10 to a 52 week high on Friday, ending the week 28% higher. CAAS is now overbought but considering the heavy volume on Friday, China Automotive (CAAS) may be able to extend her rally on Monday. But investors have to be very careful when it comes to CAAS from now on, because the stock might fall back just as fast it rose.

 

Baidu.com (NASDAQ:BIDU) is another stock on the move. Baidu.com isn't as much overbought as China Automotive Systems (NASDAQ:CAAS) however the stock was up five times out of the last six trading sessions, raising questions when such rally might come to an end. At this point it is subject to stock market sentiment. If the DJIA continues to show strength, BIDU might just well advance to $450.

CNOOC ltd. (NYSE:CEO) and Petrochina (NYSE:PTR) are among the NYSE listed Chinese stocks that moved considerably as price of oil firmed up last week. given that oil futures are up, the rally looks to have a strong footing at this point.

For the technical reading of rest of the Chinese stock universe, see chart below.

Most overbought China stock list

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The oversold China ADR list is less exciting but two stocks are certainly worth paying attention to. NetEase Inc. (NASDAQ:NTES) is oversold following rumors that it may not be able to receive regulatory approval to operate the WoW. But NTES is now oversold, suggesting the dive may come to an end. But the upswing might be just a short lived one considering that NTES is up 83.3% YTD, and if NetEase.com (NTES) can't consolidate WoW profits into her income statement, 2009 Q3 numbers won't support such a high share price.

Besides NetEase.com (NASDAQ:NTES), China Mobile (NYSE:CHL) is a surprise stock on the most oversold list. While technically speaking CHL is not oversold, the stock is trading at the low end of its trading envelope, suggesting there is upside potential. CHL present entry points to long term value investors at current prices of $50/share.

Most oversold 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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