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Nervous China Stocks

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forecast_downNov. 3, 2009 (Chinavestor) Most NYSE listed China stocks advanced on the first day of the month outperforming their NASDAQ counterparts. CNOOC ltd. (NYSE:CEO) and China Life Insurance (NYSE:LFC) advanced $3 or more while Trina Solar (NYSE:TSL) rose 5.3%. But LDK Solar (NYSE:LDK) fell 22.86%. Despite a relatively widespread advance of Chinese stocks, the overbought monitor is still plain. Most of the action takes place on the oversold side. Sohu.com (NASDAQ:SOHU), China Eastern Air (NYSE:CEA), and China Southern Air (NYSE:ZNH) became oversold. The Chinese telecom sector remains under pressure, China Mobile (NYSE:CHL) being the most prominent with a loss of momentum. The Chinese solar sector has been undervalued, Suntech Power (NYSE:STP), Canadian Solar (NASDAQ:CSIQ) and China Sunergy (NASDAQ:CSUN) are on the radar screen. On the momentum side, NetEase.com (NASDAQ:NTES) offers some glimpse of hope. Regarding Sohu.com (NASDAQ:SOHU), we have argued that the current drop following Q3 results with a lowered Q4 revenue guidance is an overshot, the stock deserves better. Share price of Sohu.com (NASDAQ:SOHU) fell 24.3% in the last five days, making SOHU the most oversold China stock of the day. For a detailed analysis of the Q3 report, please read related story of: Don't give up on Sohu.com

China Eastern Air (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) are both oversold while fundamentals are changing for the better. As the price of oil retreated under $80/barrel, airliners get a breath of fresh air. Additionally, both companies reported strong passenger growth numbers indicating that air travel is back on its feet in China. At this point both China southern Airlines (NYSE:ZNH) and China Eastern Air (NYSE:CEA) offer value for the mid-term investor.

China Mobile (NYSE:CHL) is oversold yet it's the most appealing Chinese mobile carrier. As we've said in the past, China Mobile (NYSE:CHL) under $50 is a bargain. As soon as a sexy 3G phone capable of converting 2G customers to 3G appears, China Mobile can shoot up to the $80s.

A relatively high number of Chinese solar stocks still remain on the most oversold stock screen. Suntech Power (NYSE:STP) is one of the industry leaders and a technical weakness is a signal to buy. Smaller players might offer fast returns, Canadian Solar (NASDAQ:CSIQ) and China Sunergy (NASDAQ:CSUN) are bargains at this moment. We had JA Solar (NASDAQ:JASO) on the list but it moved up after a sizable rally last week.

Most oversold China stock list

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There are no overbought China stocks at the moment. The most interesting stock on the overbought list is NetEase.com Inc. (NASDAQ:NTES). The stock made a remarkable recovery from Monday morning lows, indicating that the loss of the WoW game is already incorporated into the stock price of NetEase.com (NASDAQ:NTES). Shanda Interactive and NTES are going to report Q3 in November, - see Newsletter for details - so expect a bumpy ride until then.

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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