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Quality Chinese stocks surge

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advance8 May 28, 2010 (Chinavestor) There isn't any overbought China stock technically speaking, suggesting the good time will continue to roll for Spreadtrum Communications (NASDAQ:SPRD), Home Inns & Hotels Management (NASDAQ:HMIN), China Unicom (NYSE:CHU), Ctrip.com (NASDAQ:CTRP), eLong Inc. (NASDAQ:LONG) and Sinopec Shanghai Petrochemical (NYSE:SHI) this morning.

Stocks to pay attention to on the oversold end include Huaneng Power (NYSE:HNP), Synutra Int. (NASDAQ:SYUT), Hutchison Tel (NYSE:HTX), Hurray Holding (NASDAQ:HRAY) and WSP Holdings (NYSE:WH).

Back to the overbought indicator: Spreadtrum Communications (NASDAQ:SPRD) continues to lead the list of the overbought China stock monitor. Even a 8.9% advance on Thursday doesn't make this stock overbought thanks to an extraordinary 70% surge just in two months. This stock looks similar to City Telecom (NASDAQ:CTEL), a Chinese play that went on to a surging spree for over 52 weeks...

Home Inns & Hotels Management (NASDAQ:HMIN) is a company that has been delivering quality earnings in the past and is set to do well under current circumstances. While the stock might seem overstretched at the moment, long term trend is definitely bullish.

China Unicom (NYSE:CHU) had a bumpy rise with a positive bias this week. Chinese carriers have been under-performing for the last 52 weeks, suggesting a sector rotation will benefit telcos sometime in the future.

Ctrip.com International (NASDAQ:CTRP) surged 8.9% on Thursday as investors snapped up quality Chinese blue chips. Despite a significant price increase for the week, the stock is just barely above its normal trading range, suggesting more upside is a real possibility. The same is true for eLong Inc. (NASDAQ:LONG). While profit taking might take a toll on the stock price for the short term, bulls will remain in the driver seat for the medium term.

Shares of Sinopec Shanghai Petrochemical (NYSE:SHI), the largest ethylene and propylene maker in China, surged over 5%, a highly unusual move for the company. but this was just making up for previous losses and the stock is trading within her trading envelope - suggesting downside risk is still minimal.

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China's largest independent power producer, Huaneng Power (NYSE:HNP), is oversold technically speaking. While high coal price dents into the bottom line of electricity generators, the sudden drop cries for a correction. Momentum traders might make a quick profit on HNP in the upcoming days.

The story is different for Synutra Int. (NASDAQ:SYUT), Hutchison Tel (NYSE:HTX), Hurray Holding (NASDAQ:HRAY) and WSP Holdings (NYSE:WH). These stocks are not oversold but have lost significant momentum based on fundamentals. WSP Holdings (NYSE:WH) reported 2010 Q1 earlier this week prompting another wave of sell-off. WSP Holdings tumbles on earnings report.

Chinese solar makers have a lot of ground to make up - Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE) are on the screen but delivered robust 2010 Q1 and have started to bottom out. Value investors pay attention!

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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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