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Volatility, earnings drive Chinese stocks

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advance_8 Feb. 24, 2010 (Chinavestor) Few Chinese stocks are trading at extremes, like Synutra Int. (NASDAQ:SYUT) or Yingli Green Energy (NYSE:YGE) nevertheless volatility remains ahead of key earnings. NetEase.com Inc. (NASDAQ:NTES), the most profitable Chinese online game  developer and operator, is going to release 2009 four quarter earnings today after the close. Expect volatility to pick up for smaller online game stocks such as Giant Interactive (NYSE:GA) or Perfect World (NASDAQ:PWRD). Another stock to keep eye on is China Eastern Airlines (NYSE:CEA), a stock that's on the overbought monitor in a fairly good position and with strong momentum from Hong Kong this morning. Hong Kong listed H-shares of the second largest Chinese airline advanced 3.0% on Wednesday making it the best performing component of the Hang Seng Index.  New Oriental Education & Tech. Group (NYSE:EDU) and BMP Sunstone Corp. (NASDAQ:BJGP) sticks out from the overbought monitor this morning along with oversold AirMedia Group (NASDAQ:AMCN) and WuXi Pharma (NYSE:WX).

 

The overbought monitor captured a significant momentum build up of New Oriental Education & Tech. Group (NYSE:EDU). The stock advanced +3.04% on Tuesday to cap a week of strong gains. Based on the chart below we predict more upside for this cash rich education company.

BMP Sunstone Corp. (NASDAQ:BJGP) advanced 13.25% in the last five trading sessions and might resume going higher after a breather on Tuesday, according to the overbought chart below.

But it's been Synutra International (NASDAQ:SYUT) that is the most nerve racking China stocks at the moment. The stock has been advancing all through February with a big jump on Feb. 19 making it overbought. We notice this and put the stock on a hold - a breather that came on the 22nd. But the uptrend is here to continue, unless markets head sharply down today, according to the overbought monitor.

Most overbought Chinese stocks

OB-2010224

The relative high number of Chinese solar plays among oversold stocks is interesting. Negative sentiment of Yingli Green Energy (NYSE:YGE), Canadian Solar (NASDAQ:CSIQ) and Solarfun Holdings (NASDAQ:SOLF) are all captured by the oversold monitor. With earnings ahead for most of the solar sector, it's too early to tell where these stocks are gong to head from here. What we've seen so far looks good  - strong earnings from JA Solar (ANSDAQ:JASO) earlier the month.

AirMedia Group Inc. (NASDAQ:AMCN) is close to the bottom and might pop up - according to the oversold monitor. Another interesting and highly volatile stock to watch is WuXi Pharma (NASDAQ:WX). These stocks might offer significant short term upside for the risk takers.

Most oversold Chinese stocks

OS-2010224

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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