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Earnings, rumors push China stocks to extremes, Nov. 12

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buy_sell_2 November 12, 2010 (Chinavestor) Earnings can make it or break it for China stocks, as today's overbought and oversold report testifies. Rino International (NASDAQ:RINO) is an exception, its extreme oversold position is due to rumors not actual financials. But weak quarterly reports hurt Mindray Medical Technologies (NYSE:MR) and General Steel (NYSE:GSI). The oversold screen picked up the unusual decline of China TransInfo Technology Corp (NASDAQ:CTFO). Selected solar stocks like Yingli Green Energy (NYSE:YGE) and ReneSola Ltd. (NYSE:SOL) are under pressure as well.

Stocks on the move include Shanda Interactive (NASDAQ:SNDA), a stock that resumed a rally after two days of going sideways. Looking for the most extreme stock on the overbought screen, HQ Sustainable Maritime Industries, Inc. (AMEX:HQS) is the one. Simcere Pharmaceutical Group (NYSE:SCR) is a developing story.

The overbought end of the China stock universe is almost the same a day before - with some important changes. HQ Sustainable Maritime Industries, Inc. (AMEX:HQS) hasn't approached theoretical highs yet but the size of the arrow suggests the stretch is too much, too fast - thus upside potential looks limited for Friday.

Simcere Pharmaceutical Group (NYSE:SCR)advanced over 12% on Thursday but has just stepped over its normal trading range - suggesting more upside is possible.

OB_20101112

Most of the action took place on the oversold end of the China ADR universe. Rino International (NASDAQ:RINO)is the most extreme as the chart below testifies. Rumors sent its shares tumbling for the past five days but the company issued a statement reaffirming investors that it will report on November 15. It looks like the stock is a bargain and may bounce back very strongly!

Mindray Medical Technologies (NYSE:MR) got stuck in the rut at $27 after a 10% plunge following a weak third quarter financial report. It may take some time before the stock is going to develop a clear direction from here.

General Steel (NYSE:GSI) got hammered on financials as well. The stock fell 10% on Monday and went sideways ever since. Low volume suggests it will be difficult for the stock to find any support.

China TransInfo Technology Corp (NASDAQ:CTFO) is back to square one after last week's rally. Investors went defensive on Thursday right before earnings announcement on Friday morning, prompting the sell-off.

Solar stocks got punished on Thursday. Despite some losses, neither Yingli Green Energy (NYSE:YGE) or ReneSola Ltd. (NYSE:SOL) are technically oversold, leaving more downside on the table. Oil is at $88 a barrel, leaving little room to the upside. Should price of oil fall, vulnerable solar stocks - like these two mentioned above, are going to feel the pinch.

OS_20101112

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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