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China stocks on the move as earnings roll in

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buy-sell March 2, 2010 (Chinavestor) Earnings season have started to heat up for Chinese stocks. As Chinese companies shift into high gear rolling out earnings left and right, technical tools come handy to find market inefficiencies. Take a look at the oversold report for instance. Online game heavy weight Shanda Games (NASDAQ:GAME) and her parent Shanda Interactive (NASDAQ:SNDA) fell off the cliff along with Perfect World (NASDAQ:PWRD) after reporting earnings on Monday. Despite current weakness we're of a view that the sell-off was too aggressive and a correction should take place.

 

Another stock that offers value based on Q4 numbers is Mindray Medical (NYSE:MR) from the overbought screen - though Melco Crown Entertainment (NASDAQ:MPEL) and China Telecom (NYSE:CHA) stole the story. Vanceinfo Technologies Inc. (NYSE:VIT), China-Biotics (NASDAQ:CHBT) and Guangshen Rail (NYSE:GSH) advanced substantially over the past few days and are ready to take a breather, according to the overbought chart below.

 

We argued yesterday that China Digital TV Holdings (NYSE:STV) became overbought, a call that proved to be right. Shares of STV leveled-off on Monday following the double digit gain on Friday. But a strong market day can carry China Digital TV Holdings (NYSE:STV) higher on Tuesday because the stocks has moved away from the extreme theoretical highs since yesterday.

The overbought monitor caught Metro Crown Entertainment (NASDAQ:MPEL) on the rise. Based on current position and size of the arrow, more upside is within the cards for this casino stock.

China Telecom (NYSE:CHA) got a significant boost from Deutsche Bank last week with an analyst upgrade from HOLD to BUY. Nevertheless the stock has been stretching too fast too far and might take a breather today.

China Eastern Airline (NYSE:CEA) became overbought last week - as we pointed it out - and has been plateauing since. Don't expect much mojo from CEA today either.

The overbought monitor spotted the uptrend for Vanceinfo Technologies Inc. (NYSE:VIT). The stock has just stepped above the upper end of her trading envelope, a technical condition suggesting more upside is possible.

But traders will have to exercise caution with China-Biotics (NASDAQ:CHBT). Shares of the company are trading way above her trading range, raising the risk of a possible correction.

Shares of Guangshen Rail (NYSE:GSH) advanced 2.8% in the past five trading sessions - but such a move is unusual for this large cap railway company. GSH is operating in the Pearl Rive delta region, China's manufacturing hub, and is a solid company. As economic news from China firm up, expect GSH to catch some of that excitement. Relatively low volume is a problem for the stock but value investors should pay attention to this high dividend paying, low volatile stock.

Most overbought Chinese stocks

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Monday was the day of Chinese online gamers. Shanda Interactive (NASDAQ:SNDA), Shanda Games (NASDAQ:GAME) and Perfect World (NASDAQ:PWRD) all reported 2009 Q4 and full year numbers. Weak Q4 earnings hurt the Shanda's and PWRD but revenues grew for both companies. It looks to me that investors overreacted and sold off these stocks on fear rather than focusing on the good news.

PWRD_2009_Q4_revenue_earnings

Vimicro International Corporation (NASDAQ:VIMC) became oversold  while American Dairy (NYSE:ADY) continues to suffer. The slide may not be over for ADY - according to the oversold chart below.

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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