April 5, 2010 (Chinavestor) Shares of China Telecom (NYSE:CHA) are getting overbought after a +11% advance last week. China Yuchai International Limited (NYSE:CYD) jumped over 20% last Monday but has been leveling off. Large cap momentum stocks from last week are expected to continue the uptrend: China Life Insurance (NYSE:LFC) and Yanzhou Coal (NYSE:YZC) have room left to the upside, according to the overbought monitor. But shares of China Petroleum & Chemical Corp. (NYSE:SNP) are under pressure as the price of crude is trading over $85/barrel, eroding refining margins. But high oil price helps Chinese solars like ReneSola Ltd. (NYSE:SOL) on the overbought screen.
Shares of China Telecom (NYSE:CHA) are approaching theoretical highs suggesting a zig-zag trading pattern is likely to continue for the week. All three major Chinese carriers reported 2009 financials with CHA achieving the fastest mobile growth. For a comprehensive analysis of the Chinese telecom industry following 2009 Annual Reports, read Chinese telecom industry in 2009.
Another potentially dangerous stocks for Monday is China Yuchai International Limited (NYSE:CYD). The over 20% advance last Monday and the subsequent leveling off suggests upside is limited from here.
Large cap NYSE listed Chinese blue chips are expected to do well as liquidity surge in Shanghai will keep money flows at a high level. Strong oil price helps Yanzhou Coal (NYSE:YZC) because coal prices in China correlate very closely with that of the oil. But refining margins deteriorate when oil goes higher for Asia's largest refiner, China Petroleum & Chemical Corp. (NYSE:SNP). The price of gas at the pump is controlled by the government in China, limiting refineries ability to pass on higher crude cost on to consumers. Sinopec 2009 net jumps on lower oil price.
Chinese solar stocks benefit from high oil price and are expected to do well on Monday. ReneSola Ltd. (NYSE:SOL) is not overbought yet, leaving room to the upside. With all Chinese solar companies laving 2009 financials behind, read our comparative analysis of the industry here: Complete 2009 Q4 China solar stock guide.
Most overbought China stocks
Stocks on the oversold end of the Chinese stock universe include A-Power Energy Generation Systems, Ltd. (NASDAQ:APWR). Lowered revenue guidance send shares of the company tumbling on Wednesday and Thursday, but the stock is now oversold and ready to bounce back up, according to the chart below.
China Grentech (NASDAQ:GRRF) fell hard last week following 2009 fourth quarter and full year financials. When a stock dives on fundamentals, as is the case with GRRF, recovery takes time. Nevertheless a technical bounce back is possible given the extent to which shares of the company suffered. But again, this is more like a dead cat bounce. GRRF 2009 Q4 sends shares off the cliff.
WHS Holdings (NYSE:WH) has been on the slide since March 30 as earnings disappointed. The stock is hurt on fundamentals and is not expected to recover anytime soon. WSP plunges as 2009 Q4 loss widens.
Most oversold Chinese 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. 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.