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China stock watch-list for Nov. 9

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obos-6-10-tumbNov. 9, 2009 (Chinavestor) Stocks mentioned in this report include: Baidu.com (NASDAQ:BIDU), Yanzhou Coal (NYSE:YZC), China Petroleum & Chemical Corp. (NYSE:SNP), Trina Solar (NYSE:TSL), Ctrip.com (NASDAQ:CTRP), and Sohu.com (NASDAQ:SOHU).

Looking at China stocks from a technical point of view, Yanzhou Coal (NYSE:YZC) is on the top of the most overbought list. In fact, Yanzhou Coal (NYSE:YZC) became overbought and is in the danger zone right now.  Shares of Yanzhou Coal (NYSE:YZC) fell in Shanghai (SHI:600188) but rose in Hong Kong (HKG:1171) on Monday. It all boils down to market sentiment in the U.S. for YZC on Monday, but be careful with Yanzhou Coal (NYSE:YZC) for the next few days.

WuXi Pharma (NYSE:WX) and China Automotive Systems (NASDAQ:CAAS) are the next two stocks on the screen. Both stocks fell on Friday suggesting the rally might have reached a short term plateau.

Baidu.com (NASDAQ:BIDU) is not on today's overbought screen but I still want you to pay close attention to this stock. BIDU is off the chart because the stock is so far from being overbought. (For a current reading look up the chart within the "China Stock Weekly Roundup 2-6" article) Yet Baidu.com (NASDAQ:BIDU) is one of the best performers of last week, a stock with strong momentum and a volatile trading pattern. Baidu.com (NASDAQ:BIDU) advanced 8.42% from Monday to Friday last week, ending the week on a high tone. Despite a strong showing, BIDU is far from overbought, a bullish sentiment at the beginning of the week.

China Petroleum & Chemical Corp. (NYSE:SNP), known as Sinopec, is another stock of interest. China Petroleum & Chemical Corp. (NYSE:SNP) is the largest refiner in Asia by volume with some oil production of its own. As the following chart suggests China Petroleum & Chemical Corp. (NYSE:SNP) is not overbought and is just catching up with the rest of the Chinese oil players, Petrochina (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO). The reason while China Petroleum & Chemical Corp. (NYSE:SNP) looks interesting is that when price of oil declines, margins improve for Sinopec. Reason being that the company pays international price for the crude yet can charge just so much for refined gasoline under the government set pricing mechanism. So should current trends continue, e.g. oil coming off the $80/barrel mark, expect Sinopec (NYSE:SNP) to catch up with CNOOC Ltd. (NYSE:CEO) and Petrochina (NYSE:PTR) in the next few days.

Trina Solar (NYSE:TSL) is the only China solar play on the overbought chart below. As the monitor suggests, Trina Solar (NYSE:TSL) is far from overbought - leaving more room to the upside.Share price of Trina Solar (NYSE:TSL) is trading above the trading range but considering that all time high of Trina Solar (NYSE:TSL) was above $70, current stock price of $38.15 doesn't look pricey.

Ctrip.com (NASDAQ:CTRP) is another stock with strong momentum lately. Ctrip.com (NASDAQ:CTRP) is going to report Q3 earnings on Wednesday, November 11. Current strength is explained by expectations of a strong showing. Ctrip.com (NASDAQ:CTRP) has been one of the best Chinese companies when it comes to DELIVERING earnings. If you think Ctrip.com (NASDAQ:CTRP) will meet or exceed expectations this time, building some positions before earnings release makes perfect sense. Ctrip.com (NASDAQ:CTRP) is not overbought at the moment, leaving room for a potential rally following earnings announcement.

Most overbought China stock list

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Sohu.com (NASDAQ:SOHU) is the most interesting China play from the oversold list. While the stock price hasn't changed a lot from Monday to Friday it certainly moved over the week, from lows of $52 to current $55.58. Sohu.com (NASDAQ:SOHU) is still considered oversold, suggesting there is more to the upside. Sohu.com (NASDAQ:SOHU) fell hard following earnings announcement, similarly to Baidu.com, but while BIDU has recovered Sohu.com (NASDAQ:SOHU) is still in shambles.

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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