Dec. 3, 2009 (Chinavestor) with index futures pointing to a higher open, expect momentum China stocks to do well on Thursday. China Automotive Systems (NASDAQ:CAAS), Solarfun Power (NASDAQ:SOLF) and Wuxi PharmaTech (NYSE:WX) continue to tower the overbought list while big movers such as E-House Holdings (NYSE:EJ), China TechFaith Wireless (NASDAQ:CNTF), General Steel Holdings (NYSE:GSI) and Wonder Auto technology (NASDQ:WATG) are additional stocks of interest for today.
The "Weekly Stock List" distributed for Advanced Members has three big ticket names from last Friday; AsiaInfo Holdings (NASDAQ:ASIA), Ctrip.com (NASDAQ:CTRP), and JA Solar Holdings (NASDAQ:JASO). All these names advanced over 10% since last Friday. If you want to know what stocks we're going to pick tomorrow, sign up for Advanced membership now. For detailed description of subscriber benefits, visit the Premium Content page.
Stocks to avoid on Thursday include A-Power Energy (NASDAQ:APWR), KongZhong Corp. (NASDAQ:KONG), WSP Holdings (NYSE:WH), Tiens Biotech Group (AMEX:TBV), and China Architectural Eng. (NASDAQ:CAEI).
Most overbought China stock list
General Steel Holdings inc. (NYSE:GSI) stands out by looking at the best stocks of the last few days. The stock price jumped 11.30% on Tuesday and the huge underlying volume suggests the rally is far from over.
Credit Suisse resumed coverage on E-House (NYSE:EJ) on December 1st as outlook for China's real estate brightened. The relatively weak performance of the China Real Estate ETF (NYSE:TAO) suggests there has been an overall weakness in the sector and EJ has good days ahead.
China Automotive Systems (NASDAQ:CAAS) remains overbought but is expected to do well today thanks to strong market conditions. But profit taking might succumb to profit taking as it's trading at all time high.
The strong performance of JA Solar (NASDAQ:JASO) is lesser of a surprise for us because the oversold indicator picked this solar play up at a time when the sector was on fire. Rotation within the sector suggested JA Solar will have to catch up with the rest of the sector, an assumption that proved to be right.
Ctrip.com (NASDAQ:CTRP) and AsiaInfo Holdings (NASDAQ:ASIA) has been strong for a longer time, but as the overbought monitor suggested none of them were overbought last Friday. This in turn implied that there is more to the upside, another assumption that worked for the benefit of Advanced members.
Stocks to avoid are those that have no momentum and are weak from a fundamental point of view. KongZhong Corp. (NASDAQ:KONG) and Linktone Ltd. (NASDAQ:LTON) fit this category perfectly. Both companies reported worse then expected financials this week and fell accordingly. As the following oversold indicator suggests, Linktone (NASDAQ:LTON) is more oversold then KONG but since the weakness is driven by fundamentals, don't expect any of these companies to turn around anytime soon.
Most oversold China stock list
There has been a lot of excitement about A-Power Energy Generation Systems (NASDAQ:APWR) lately but since earnings disappointed last night, APWR looks to hit a downhill beyond today's expected fall.
WSP Holdings Limited (NYSE:WH) reported a net loss for the third quarter, a hard to digest news for China stock investors. The bottom for WH is still uncertain despite a 25% loss in the last five days.
Tiens Biotech (AMEX:TBV) is back to square one after the recovery following the 25% dive since November 13. Volume and additional technicals suggests the worst is not over yet for this dietary supplement maker.
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.