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China stocks can't fight the market on Friday

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buy-sellNov. 20, 2009 (Chinavestor) China solar stocks have been on fire as evidenced by the overbought / oversold indicator. We have the following seven China solar plays right now on the overbought monitor: Solarfun Power Holdings (NASDAQ:SOLF), Canadina Solar (NASDAQ:CSIQ), Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP), LDK Solar (NYSE:LDK), Yingli Solar (NYSE:YGE), and China Sunergy (NASDAQ:CSUN). Besides solar, China Mobile (NYSE:CHL), Rino International (NASDAQ:RINO), NetEase.com Inc (NASDAQ:NTES), China Unicom (NYSE:CHU) and China Automotive Systems (NASDAQ:CAAS) look interesting from a technical point of view this morning.

 

We argued in the China stock for bottom fishing article on November 10 that "While revenues and earnings swung back up, stock price hasn't". We added LDK Solar (NYSE:LDK) to the weekly buy list last Friday at 3:30 just to follow it up with an email alert to sell on November 18 at the end of the day. We added two solar stocks to the monthly portfolios as well, an excellent move before the solar sector rally. All this euphoria is based on a much stronger performance of the sector than expected.  Trina Solar (NYSE:TSL) reported before the open on Thursday, sending her shares 6.6% higher for the day. Suntech Power (NYSE:STP) was just as strong ahead of earnings, advancing 5.96%. Suntech Power (NYSE:STP) reported after close, beat expectations suggesting the solar sector is in much better share than originally though. We have seen the following solar stocks to report above analysts' estimates so far: Solarfun power Holdings (NASDAQ:SOLF), Canadian Solar (NASDAQ:CSIQ), Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP), Yingli Solar (NYSE:YGE) and JA Solar (NASDAQ:JASO). The only large solar player not reporting yet is LDK Solar (NYSE:SLK), scheduled for November 23 before the bell.

The good news is that despite double digit gains, most solar stocks are far from overbought at this time, a very bullish sentiment. But solars can't fight the market alone, so don't expect them to do well on Friday when index futures point to a lower open. All three larger solar stocks Suntech Power (NYSE:STP), LDK Solar (NYSE:LDK) and Trina Solar (NYSE:TSL) are trading lower in pre-market hours. But this just may be an opportunity for buying into weakness. Something to think about. And finally, Solarfun Power Holdings (NASDAQ:SOLF) is the most overbought among China solar stocks, suggesting upside is limited for this stock in the short run.

Another stock of interest is China Mobile (NYSE:CHL). We published an article regarding the dynamics within the Chinese mobile  sector earlier this week: WSJ Wrong on China Smartphones. Based on the latest developments we see a lot of upside potential for China Mobile (NYSE:CHL). Besides fundamentals, the oversold indicator picked up China Mobile (NYSE:CHL) three weeks ago suggesting the stock hit bottom. Despite recent surge, China Mobile (NYSE:CHL) is far from overbought still offering entry point for the value buyer.

There has been a lot of interest regarding Rino International (NASDAQ:RINO). While none of us knows what the future holds, it looks that Rino int. (NASDAQ:RINO) has run a bit ahead of the curve at this point and might take a breather. The Company has $52 plus million backlog of orders, has been running at full capacity, raising questions if a 40% growth is sustainable. One thing is for sure: management of Rino International (NASDAQ:RINO) is under the daunting task of sustainable growth when just to keep running at 100% is more then enough.

Note: it's Friday, time to update the Weekly Stock Buy list. If you want to know what stocks we're going to pick for the upcoming week, Register for Advanced membership Now.

Most overbought China stock list

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Earnings related news dominate stocks on the oversold end of the China ADR universe. NetEase.com (NASDAQ:NTES), E-House (NYSE:EJ), China Grentech (NASDAQ:GRRF) didn't impress investors lately while China unicom (NYSE:CHU) reported a slip in subscriber growth yesterday. China Unicom (NYSE:CHU) has the iPhone but as we argued it is way too expensive for the ordinary Chinese limiting its penetration. Shanda Games (NASDAQ:SNDA) and Giant Interactive (NYSE:GA) are going to report later this month, giving more visibility into the online game sector. Weakness of NetEase.com Inc. (NASDAQ:NTES) is not necessarily as bad as the market reaction would suggest but again, we have to wait for more earnings to assess the situation with the sector.

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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