Nov. 18, 2009 (Chinavestor) Earnings and momentum keep pushing Chinese stocks higher. But be careful for the rest of the week because profit taking can hurt overbought stocks. Yanzhou Coal (NYSE:YZC) and China Automotive Systems (NASDAQ:CAAS) are in the danger zone while Sina Corp. (NADAQ:SINA) has more upside left. Chinese airliners fell on Tuesday, as expected. Our advice and email alert sent to subscribers on Monday was a sound advice indeed. WuXi Pharma Tech (NYSE:WX) is out of the overbought list while Canadian Solar (NASDAQ:CSIQ) and Solarfun Power Holdings (NASDAQ:SOLF) are worth paying close attention to.
As the overbought chart below testifies, Yanzhou Coal (NYSE:YZC) became clearly overbought. Increase of oil prices on U.S. supply drop may be a short term catalyst, but upside is limited for the stock.
China Automotive Systems (NASDAQ:CAAS) is almost just as overbought as YZC. While there has been a lot of excitement around the Chinese auto industry the 400% run in 2009 makes investors wonder where the ceiling is for China Automotive Systems (NASDAQ:CAAS). Based on a five year stock price chart, chances are that stock price will not stay above $15 for a long time. But it's hard to argue with a blockbuster revenue and earnings growth of 75% and 350%, respectively.
Solar stocks are the ones to watch today. Solarfun Power Holdings (NASDAQ:SOLF) is reporting this morning, giving more visibility into the sector before the big guns, Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP), reports on Thursday. According to the chart below, Canadian Solar (NASDAQ:CSIQ) has had a strong run lately, making it vulnerable to a negative surprise. Solarfun Power (NASDAQ:SOLF) is rather neutral at this point with upside potential, if earnings will come out good. Based on what we've seen from JA Solar (NASDAQ:JASO), Yingli Solar (NYSE:YGE) and LDK Solar so far, we see the glass half full rather than half empty. Either way, expect the solar sector and Solarfun Power (NASDAQ:SOLF) to move today.
Sina Corp. (NASDAQ:SINA) jumped 10% on strong earnings giving a lift to other internet plays such as Sohu.com (NASDAQ:SOHU). There is additional upside left for Sina Corp. (NASDAQ:SINA) as the overbought chart testifies. Besides technicals Sina Corp. (NASDAQ:SINA) looks good on fundamentals as well, suggesting more upside for the stock.
Most overbought China stock list
There is not much activity on the oversold China stock list this morning. Tongxin International (NASDAQ:TXIC) is a stock to watch though because despite a weak showing following Q3 numbers, the stock offers opportunity for the value buyer. Expect more coverage of TXIC from Chinavestor in the near future.
Most oversold China stock list
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.