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How low can China stocks go?

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question_3 May 25, 2010 (Chinavestor) The market might bottom out later this week, according to the oversold China stock monitor this morning. The larger number of Chinese ADRs on the low end of the market combined with a relatively small change in stock prices from last week suggests the negative trend has started to ease. While Europe's problems keep markets under pressure, the time has come for value investors to step forward.

Chinese solar stocks don't outperform despite strong financial results. Trina Solar (NYSE:TSL) beat estimates by $.05 this morning yet is down in pre-market trading. JA Solar (NASDAQ:JASO) and Solarfun Power (NASDAQ:SOLF) are among the most oversold China stocks for no reason.

 

General Steel (NYSE:GSI), ShengdaTech Inc. (NASDAQ:SDTH), Fushi Copperweld (NASDAQ:FSIN), Focus Media Holdings (NASDAQ:FMCN) and China-Biotics (NASDAQ:CHBT) have fallen hard lately, suggesting they might bounce back the strongest when market conditions improve.

 

Trina Solar (NYSE:TSL) reported before the open on Tuesday, beating estimates and guiding higher for the upcoming quarter. Trina Solar 2010 Q1 beats estimates. JA Solar (NASDAQ:JASO) reported a week earlier, Yingli Green Energy (NYSE:YGE) reported yesterday - all above analysts' expectations. Solarfun Power Holdings (NASDAQ:SOLF) will report tomorrow after the close.

Copper demand remains strong in China, suggesting Fushi Copperweld (NASDAQ:FSIN) is going to do well. Chinese copper demand to remain strong.

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Stocks on the upside include Longtop Financial (NYSE:LFT), a Chinese financial software developer.  The company beat estimates on Monday helping her shares to jump 11.3% on the news. Longtop soars following 2010 Q1.

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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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