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Oversold China Stocks to Bounce Back

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forecast1Oct. 29, 2009 (Chinavestor) As the Dow slipped another 100 points plus on Wednesday investors have started to worry if this is just a hiccup or something more serious. Today's GDP reading will give investors some clout about the health of the U.S .economy, a key measure for the rest of the week. Whatever happens,  a large portion of Chinese stocks became oversold and are ready for a comeback.

 

Looking at the most oversold Chinese ADR universe Chinese telecoms are way oversold, offering opportunity for the value buyer. China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) are just as oversold as Sohu.com (NASDAQ:SOHU) while China Telecom (NYSE:CHA) is among the most oversold China plays as well. China Digital TV Holding (NYSE:STV) is screaming off the chart just as is Suntech Power (NYSE:STP). We analysed the situation with GRRF and EJ in prior days, this time we'll concentrate on the "newcomers".

 

The Chinese telecommunications sector has been an underdog in 2009 following uncertainty about the 3G market. China Telecom (NYSE:CHA) has a European based 3G network protocol. China Unicom (NYSE:CHU) has the American CDMA based 3G system, while China Mobile (NYSE:CHL) is stuck with a home grown TD-SCDMA network that has no viable phones yet. So when Chinese telecoms reported subscriber growth and financials earlier this week, investors were turned off due to lack of 3G subscriber growth. But here is the trick. China Mobile (NYSE:CHL) has more subscribers than the entire population of the U.S. Rest assured Nokia, Dell, and all mobile companies involved in 3G phone development are working hard to come up with a phone that is not only capable of handling current 2G network (GSM based) and new 3G network (TD-SCDMA) but is appealing to customers as well. Once that phone appears, demand for such product will be in the tens or even hundreds of millions. This is when China Mobile (CHL) is going to upgrade current 2G subscribers to 3G in the millions, blowing away previous estimates and projections and giving its stock price a 50% boost. If you think that's a viable scenario, this is the time to snap up some CHL under $47.

China Digital TV Holding (NYSE:STV) is new on the radar screen. The stock price has been steadily eroding over the last five trading days, raising questions where the bottom might be. But if you pay close attention to the oversold chart, China Digital TV Holding (NYSE:STV) is now oversold and is ready for a comeback.

Suntech Power (NYSE:STP) lost 18% in the last five trading days and became oversold as well. Suntech Power (NYSE:STP) is an industry leader, a solid company with a diversified product portfolio. While the weakness of solar companies is not limited to Suntech Power only, industry leaders are typically leading the bounce back. If you think Chinese solar stocks are way oversold and undervalued, Suntech Power (NYSE:STP) may be a good stock to invest.

Most oversold China stock list

OS-1029

Please find attached the most overbought China stocks list for your review below. As the chart testifies, most momentum China stocks are on the retreat with no indication which one is going to turn around and when.

Most overbought China stock list

OB-1029

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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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