May 27, 2010 (Chinavestor) "The whole Chinese market is a buy" said Jerry Lou, a Morgan Stanley China strategist earlier this morning - and he is not far from the truth. Huaneng Power (NYSE:HNP) is the most oversold China play at the moment after a 6.8% drive on Wednesday. But China's largest independent power producer is a compelling value stock in the low $20s. China Natural Resources (NASDAQ:CHNR) fell 6.4% ahead of releasing the annual results of operations for 2009. General Steel (NYSE:GSI) may bounce back up but weakness of Linktone Ltd. (NASDAQ:LTON) and Nam Tai Electronics (NYSE:NTE) are fundamentally driven, suggesting a rally might be off.
But energy stocks, and solars in particular, are positioned well to take advantage of higher oil price and strong earnings. China Unicom (NYSE:CHU) is stretching too thin after a 6% advance in the last five days, suggests the oversold monitor. eLong Inc. (NASDAQ:LONG) is similar to CHU from a technical point of view - upside may be limited on Thursday.
Stocks to watch closely on Thursday are those that have shown momentum but are not overdone. Home Inns & Hotels Mgmt (NASDAQ:HMIN) reported strong 2010 first quarter earnings and is expected to do well today. This is very similar to Ctrip.com (NASDAQ:CTRP), another Chinese NASDAQ listed blue chip.
Yucheng Technologies (NASDAQ:YTEC), Longtop Financial (NYSE:LFT) and Simcere Pharma (NASDAQ:SUTR) all look appealing on the overbought chart below.
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.