March 17, 2010 (Chinavestor) Earnings, earnings, and earnings... when it comes to China stock movers. Strong earnings propelled shares of Global Sources (NASDAQ:GSOL) to 2010 record levels. Shares of Melco Crown Entrainment (NASDAQ:MPEL) resumed the rally on the back of strong fundamentals. But worse-than-expected numbers sent shares of small cap China stocks tumbling. Stocks with a significant loss of momentum on the oversold chart include American Oriental Bioengineering (NYSE:AOB), Acorn International (NYSE:ATV), General Steel (NYSE:GSI), WuXi Pharmatech (NYSE:WX) and Jinpan International (NASDAQ:JST).
Melco Crown Entertainment (NASDAQ:MPEL) was the best performing China ADR on Tuesday with a +8.5% advance. The good news is that the stock is not overbought yet leaving more room to the upside on Wednesday.
Shares of Global Sources (NASDAQ:GSOL) took a breather on Tuesday after a huge advance on Monday. But this may be just a temporary halt because the stock is not terribly overbought and the advance is based on strong fundamentals. Global Sources 2009 Q4 rocks!
Shares of Noah Education Holdings Ltd. (NYSE:NED) advanced with heavy underlying volume, suggesting more upside is laying ahead. The stock is far from theoretical highs and is trading not far above her trading envelope at the moment.
Another big mover from Tuesday is ATA Inc. (NASDAQ:ATAI), a stock that lost -7.5%. Trading has been very erratic, at best, with low underlying volume. This suggests profit taking has been responsible for the dramatic fall yesterday. The stock is trading back within its normal trading range leaving investors in the dark when it comes to where the next move is going to be.
Most overbought Chinese stocks
Earnings related news dominate the oversold end of the China stock universe. American Dairy (NYSE:ADY), the third most oversold stocks on yesterday, is gone from the chart thanks to a +7.7% rally. But such a rally is highly unusual for the stock and expect some weakness down the road.
Shares of American Oriental Bioengineering (NYSE:AOB) suffered the most unusual dive according to the oversold chart below. The tumble is a result of weak financials nevertheless the stock is considered oversold and is ready for a technical bounce back. 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. Long term prospects for American Oriental (NYSE:AOB) remain dim due to fundamentals. AOB down on earnings, outlook.
Shares of General Steel (NYSE:GSI) tumbled -8.8% on weak earnings. The stock is still trading within her trading envelope suggesting more downside is possible.
Shares of WuXi Pharmatech (NYSE:WX) advanced +4.7% - a little surprise to Chinavestor customers. We pointed out that WX was oversold and was ready to make a move. We think there is more upside potential based on the chart below. For our fundamental take at the situation read WuXi Pharma lacks growth, promises more.
Shares of Jinpan International (NASDAQ:JST) have fallen significantly but the end may be not in sight just yet. The stock is still trading within her trading range, suggesting more downside is possible. The underlying problem is weak earnings and outlook, just as is the case with the rest of the oversold group.
Acorn International (NYSE:ATV) have fallen similarly to Jinpan Int. (NASDAQ:JST). Both stocks are down on weak fundamentals and are trading far from theoretical lows - a dangerous combination of technicals and fundamentals. Five reasons to shun ATV after 2009 Q4.
Most oversold China stocks
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.