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China stocks advance on Yuan peg relax

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advance7 June 21, 2010 (Chinavestor) The relaxation of the Yuan peg helped Chinese indices to soar in Asia on Monday. Chinese domestic oriented stocks jumped; H-shares of China Unicom (HKG:0762) (NYSE:CHU) jumped 9.1% followed closely by Chinese airliners. Chinese airliners have seen strong profitability on the wake of the return of business and leisure travelers. This will help Home Inns & Hotels Management Inc. (NASDAQ:HMIN) as well.

 

Chinese ADRs look to have significant upside after the bell on Monday from a technical point of view. With no overbought China ADR at the moment, the rally is expected to be universal. Despite technical strengths from last week, shares of New Oriental Education & Tech. Group Inc (NYSE:EDU), 51job Inc. (NASDAQ:JOBS), Ctrip.com (NASDAQ:CTRP), Gushan Env. Energy (NYSE:GU), Zhongpin Inc. (NASDAQ:HOGS), Longtop Financial (NYSE:LFT) and Sina Corp. (NASDAQ:SINA) are far from overbought. With no oversold China ADR at the moment, let's take a closer look at the overbought end of the China ADR universe.

 

China Unicom (NYSE:CHU) reported operational statistics for May on Friday, revealing that 3G subscriber growth outstripped 2G growth for the first time. Behind China Unicom 2010 May Operational Statistics. China Unicom (NYSE:CHU) was the best performing China stock in Hong Kong earlier today, suggesting a similar performance on the NYSE is likely to follow.

New Oriental Education & Tech. Group Inc (NYSE:EDU) is taking the lead among overbought China ADRs yet the stock is not overbought technically speaking. There is more room left to the upside!

Home Inns & Hotels Management (NASDAQ:HMIN) is not overbought but is a high quality stock, something value and momentum investors should pay attention to.

Ctrip.com International (NASDAQ:CTRP) is another domestic China company that will benefit from a firmer yuan. Shares of the company haven't approached theoretical highs yet - more upside is on the way!

51job Inc. (NASDAQ:JOBS) has been on fire since surprising investors with a solid 2010 first quarter financial report. 51job Inc. ready to rumble on 2010 Q1 growth. Despite a 12% jump last Thursday, more upside is possible for this small cap China play.

Zhongpin Inc. (NASDAQ:HOGS) just completed a nine day winning streak last Friday - but the stock is not overbought! The rally has been gradual leaving more room for growth. But investors have to realize that each rally comes to an end, eventually - but that correction might be muted for HOGS.

Gushan Environmental Energy (NYSE:GU) is expected to jump on Monday - along with the rest of the energy sector. Shares of Petrochina (NYSE:PTR), the largest Hong Kong listed China company, jumped 4.7% earlier today, the most in four years. Expect GU to outperform the broad market on Monday.

Sina Corporation (NASDAQ:SINA) is another internet blue chip with solid financials and strong balance sheet. Despite creeping higher last week, more upside is ahead China stock investor!

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There is no oversold China stock at the moment, technically speaking. With an overall market rally underway, today's oversold indicator is rendered useless.

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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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