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Strong market day to move momentum China stocks

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advance9Nov. 23, 2009 (Chinavestor) Index futures point to a sharply higher open for major U.S. indices. China stock investors should embrace themselves for an exciting market day. Stocks mentioned in this report include China Eastern Airline (NYSE:CEA), Aluminum Corp. of China (NYSE:ACH), KongZhong Corp. (NASDAQ:KONG), China Petroleum & Chemical Corp. (NYSE:SNP), American Oriental Bio (NYSE:AOB), China Automotive Systems (NASDAQ:CAAS), 3SBio Inc. (NASDAQ:SSRX), China-Biotics (NASDAQ:CHBT), and LDK Solar (NYSE:LDK).

Investors are going to see the most Chinese companies to report in one day on Monday. LDK Solar (NYSE:LDK) is one of the most widely watched because it completes the list of the largest Chinese solar companies. LDK Solar (NYSE:LDK) reported stronger-than-expected and is trading 11.5% higher in pre-market trading. LDK Solar (NYSE:LDK) advanced 25% last week but has more upside left according to the overbought chart below. Expect the rest of the solar sector to do well. Based on the overbought indicator, Chinese solar stocks are far from overbought despite a strong performance last week. Solarfun Holdings (NASDAQ:SOLF) is the most overbought but larger cap Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) has significant upside potential left.

China Automotive Systems (NASDAQ:CAAS) is the most overbought China ADR at the moment but a strong market day will most likely keep it go higher. Looking at the bottom of the most overbought China stock chart, China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) came off previous highs last week. But Chinavestor subscribers have every reason to cheer thanks to a timely email alert sent out last Monday. One of these airliners has been on the Conservative Portfolio for 12 months yielding a 125% return.

3SBio Inc. (NASDAQ:SSRX) and China-Biotics (NASDAQ:CHBT) have been on file last week. These smaller cap China plays are expected to keep doing well on the back of a strong market day, like today. Additional plus for both 3SBio Inc. (NASDAQ:SSRX) and China-Biotics (NASDAQ:CHBT) is that they reported strong Q3 earnings.

Most overbought China stock list

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On the most oversold end of the Chinese ADR universe Aluminum Corp. of China (NYSE:ACH), KongZhong Corp. (NASDAQ:KONG) and China Petroleum & Chemical (NYSE:SNP) stand out. American Oriental Bio (NYSE:AOB) is weak following all right Q3 numbers but the company restated earnings from 2006 on, a very unfortunate development for any company. Don't expect AOB stock price to recover anytime soon if American Oriental Bio (NYSE:AOB) looses investors' confidence.

Aluminum Corp. of China (NYSE:ACH) is now trading at the low end of her trading range, a significant move since last Monday. But with world markets on the go, expect commodity plays do well on Monday. Aluminum Corp. of China (NYSE:ACH) has a lot of ground to make up compared to Yanzhou Coal (NYSE:YZC), for example.

China Petroleum & Chemical Corp. (NYSE:SNP), known as Sinopec, is another undervalued China value play. Sinopec reported strong earnings on lower oil price and improved margins, a fundamental strength that's still present. There is a potential upside for Sinopec (NYSE:SNP) according to the oversold chart below.

KongZhong Corp. (NASDAQ:KONG) is now trading below her trading range, but this weakness is fundamental driven and as such is less likely to turn around on Monday.

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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