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Baidu and other promising China stocks

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solar_5 Feb. 17, 2010 (Chinavestor) Looking at the China stock universe this morning, Baidu.com (NASDAQ:BIDU) is a stock to watch. The stock has been strong after 2009 Q4 numbers and is likely to give the $500 level a try. Shares of Baidu.com (NASDAQ:BIDU) are not overbought at this point, based on the overbought monitor below. Another stock that looks good for today is Acorn International (NYSE:ATV). China Precision Steel (NASDAQ:CPSL) reported yesterday and advanced just shy of 20% - yet is not overbought. eLong Inc. (NASDAQ:LONG) has been oversold for a long time, as we have written extensively about it in the last couple of days, and though we didn't know the time when it would pop, it did yesterday. That's the most important development on the oversold end of the China stock list.

Chinese airliners outperformed in Hong Kong this morning and thus expect China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) to do well on Wednesday. Chinese solar stocks advanced on Tuesday, a trend likely to continue unto Wednesday. Watch out for liquid and volatile solar plays such as Yingli Green Energy (NYSE:YGE), Trina Solar (NYSE:TSL) and JA Solar (NASDAQ:JASO).

Taking a closer look at the overbought monitor this morning, Baidu.com (NASDAQ:BIDU) continues to tower the list. The stock is fundamentally solid, may get a chance to capture even more of the market should Google (NASDAQ:GOOG) decide to pull back from China. Given Baidu's volatile nature, a run to over $500 is in the cards.

Acorn International (NYSE:ATV) is another highly volatile stock. The overbought screen captured the spectacular rise of this stock back in October 2009 and again in December and January... It's hard to tell if this rally is for real or more like a V sharped bump... Right now the stock is not overbought suggesting more upside is possible.

China Precision Steel (NASDAQ:CPSL) jumped +18% on Tuesday following better-than-expected earnings announcement. The stock has more upside left, if the overbought monitor is right for this stock. But remember, small cap stocks tend to be extremely volatile and thus a technical indicator such as the overbought monitor, will not be a crystal ball.

Most overbought Chinese stocks

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eLong (NASDAQ:LONG) has been the most oversold China ADR for a long time - but a $.06 or 7.39% advance on Tuesday propelled it out of the danger zone. Small cap China stocks are prone to pop up - as was the case with eLong Inc. (NASDAQ:LONG). Timing is very difficult because stocks just pop up on zero notice. Looking at today's oversold list there is not a single China stock that is poised to pop - based on technicals alone. Given that the earnings calendar is extremely light for this week, don't pay much attention to today's list.

Most oversold China stocks

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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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