Nov. 19, 2009 (Chinavestor) Wuxi Pharma (NYSE:WX) bounced back up to the overbought China stocks list yesterday but solar companies and Netease.com (NASDAQ:NTES) dominated the news on Wednesday. LDK Solar (NYSE:LDK) advanced 20% but is far from overbought. Solarfun Power (NASDAQ:SOLF) jumped 11.15% following news that it swung back to profit and is not overbought either. With earnings of Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) in the pipeline today, expect solar stocks to remain active.
Yanzhou Coal (NYSE:YZC) is the most overbought China ADR at the moment. We have just published what's behind such a strong performance: JP Morgan bought over 9 million H-shares in the Hong Kong Stock Exchange. Chinavestor had YZC in the "Conservative" portfolio for subscribers for November but issued a SELL email alert on November 18 for profit taking.
One of the most important developments of the week is the resurgence of solar stocks. Improved margins, stronger sales and positive cash flow is propelling most Chinese solar stocks. Solarfun Holdings (NASDAQ:SOLF) is up 26% just in the last five days - but according to the overbought indicator there is upside left for the stock. Solarfun Power Holdings (NASDAQ:SOLF) just reported before the open on Wednesday surpassing analysts' estimates. The company is back in the black, revenue are up and guided higher for the rest of the year. Strength of Solarfun Power (NASDAQ:SOLF) is in line with the rest of the sector: JA Solar (NASDAQ:JASO) and Yingli Solar (NYSE:YGE) reported better-then-expected as well. But we're going to get clear visibility into the sector later today. Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) are going to report after the close on Thursday. Looking at the overbought indicator there is upside left for both STP and TSL with a difference. Trina Solar (NYSE:TSL) is ahead of the curve at current stock price of $42.75. Suntech Power (NYSE:STP) has been underdog for the month, suggesting more upside is left for STP - see Google chart here.
Another interesting development is the 20.3% jump of LDK Solar (NYSE:LDK) on Wednesday. Despite such a dramatic increase, LDK Solar (NYSE:LDK) is FAR from overbought. This is a very bullish sign when the solar sector is on fire. LDK Solar (NYSE:LDK) is scheduled to report on November 23 before the bell.
Most overbought China stock list
Looking at the other end of the China stock list, e.g. most oversold, Tongxin Int. (NASDAQ:TXIC) remains on the top of the list. Tongxin lost over 10% in the last five days following Q3 numbers. While mainstream investors remain cautious, the stock might offer entry position for the value buyer. With a P/E of 4.2, it's hard to argue the stock is undervalued. TXIC reported 18.8% revenue and 83.4% net income growth and reiterated 2009 guidance. Looks like TXIC is a lump of coal that can turn into diamond. something to think about...
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.
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