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Chinese value stocks of the day

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advance7Nov. 17, 2009 (Chinavestor) Comments of low interest rates to stay by the FED Chairman pushed lower the dollar, spurred markets and commodities. Chinese ADRs reacted favorably but the number of overbought China stocks is on the rise and cries for action. Chinese airliners, China Southern Airlines Ltd. (NYSE:ZNH)  and China Eastern Airlines (NYSE:CEA) are screaming off the overbought chart. HSBC Plc. (NYSE:HBC), a Hang Seng Index heavy weight has been unusually strong in November. Markets rediscovered once oversold Chinese solar stocks such as Canadian Solar (NASDAQ:CSIQ), Solarfun Power Holdings (NASDAQ:SOLF), Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP). NetEase.com Inc. (NASDAQ:NTES) is going to report earnings after the close today, while E-House Holdings (NYSE:EJ) is reporting right now before the open.

 

The strength of Chinese airliners was foretold by the overbought/oversold tool. We picked up the sector earlier this month while China Southern Airlines (NYSE:ZNH) and CEA were oversold. We wrote on October 22 that  "China Eastern Airlines (CEA) present bottom fishing opportunity for the intelligent investor."

Chinese airliners also presented long-term value for Premium subscribers. We added China Southern Airline (NYSE:ZNH) to the Conservative portfolio exactly a year ago when ZNH was under $8/share. Now that China Southern Airline (NYSE:ZNH) became overbought and ran up 125% since last November, we sent out the following email alert to subscribers yesterday:

Stock Alert for the following stocks from the Conservative and Growth Portfolios: China Southern Airlines (NYSE:ZNH), China Mobile (NYSE:CHL), NetEase.com (NASDAQ:NTES), LDK Solar (NYSE:LDK), Suntech Power (NYSE:STP).

  • China Southern Airlines (NYSE:ZNH) advanced $1.21 to $17.80 last Friday and became overbought. China Southern Airlines (NYSE:ZNH) advanced 20% just in November. China Southern Airlines (NYSE:ZNH) was added to the “Conservative” portfolio last November at $7.88. That is a 127% return. While there may be additional upside for the stock, I suggest you taking profits off the table.

Another sector we got right before the market did is the Chinese solar sector. We have been arguing that the sector is way oversold and is ready for a comeback. "The Chinese solar sector remains undervalued " - we said on October 21. Solarfun Power Holdings (NASDAQ:SOLF) is going to report on November 18 before the bell but the big solar day is Thursday, November 19. Industry heavy weight Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) are going to report. There has been quite an exuberance within the sector lately and if you bought Suntech Power (NYSE:STP), LDK Solar (NYSE:LDK ), Trina Solar (NYSE:TSL) on time, you're already ahead of the game.

If you want to know what solar and other stocks we have in the portfolios and want to receive email alerts when to sell, sign up for Advanced Membership now. Visit the "Premium Content" page for detailed description of subscriber benefits.

HSBC Plc. (NYSE:HBC) is not your typical China stock but is on our radar screen for two reasons. For one, HSBC Plc. (NYSE:HBC) has a substantial exposure to China's banking system and for two, HSBC is a Hang Seng index heavy weight. Interestingly, this "boring" stock is among the most overbought China stocks but it shouldn't be a surprise after a 15% run in November. it is highly unusual for large cap financial institutions to move that much in such a short period of time. Needless to say, HSBC Plc. (NYSE:HBC) became overbought and is ready to level off.

NetEase.com (NASDAQ:NTES) is ready to release latest financial report after the market close today. Sina Corp. (NASDAQ:SINA) reported better-then-expected numbers yesterday after the close, sending her shares 4.8% higher after-hours. Strength within the Chinese Internet sector will help shares of Sohu.com (NASDAQ:SOHU) and online game developers Shanda Games (NASDAQ:GAME) in addition. We're going to pay close attention to NetEase.com Inc. (NASDAQ:NTES) today.

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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