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Telcos, airliners on the move

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warning3 June 29, 2011 (Chinavestor) China Mobile (NYSE:CHL) is trading closest to theoretical highs, leaving more upside for other players from the sector such as China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU). Trading stock China Automotive Systems (NASDAQ:CAAS) and Melco Crown Entertainment (NASDAQ:MPEL) have sustainable momentum at this point. Canadian Solar (NASDAQ:CSIQ) took a breather hitting a resistance above $11 level. China airliners have shown momentum as price of oil subdued, but with oil futures back above $93/barrel, short term outlook for China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) is dim. Oil price related Sinopec (NYSE:SNP) is expected to take a break as well.

China Mobile (NYSE:CHL), the largest mobile operator in the world, is ready to a take a breather but the rest of the industry is looking good. China Telecom (NYSE:CHA) hasn't advanced as aggressively as its larger rival and has more upside left. China Unicom (NYSE:CHU), the second largest mobile carrier in China, is expected to catch up with the rest of the sector.

China Automotive Systems (NASDAQ:CAAS) reported sound quarterly results and is expected to trade higher for the rest of the day. Investors were antipicapting such sound results and have sent the stock higher earelier the week. Despite a 35% advance since last Friday, more upside is possible, according to the overbought monitor.

Melco Crown Entertainment (NASDAQ:MPEL) kept creeping higher and is looking good for the short term. The stock is far from theoretical highs leaving upside potential on the table.

Canadian Solar (NASDAQ:CSIQ) looks very similar to Melco Crown Entertainment (NASDAQ:MPEL) on the overbought chart. But CSIQ looks to have hit a resistance at the $11 range giving investors no idea where the stock is going to go from here.

Some of the most striking stocks on the overbought screen are China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA). But their advance is capped by rising oil prices, at least for the short term. While none of them are overbought, it's going to be oil prices not technicals that will move them.

China's largest oil refiner, Sinopec (NYSE:SNP), has advanced as price of oil fell. But sitatation is very similar to Chinese airliners - price of il is here to follow.

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There are two oversold China stocks extremes: Cleantech Solutions (NASDAQ:CLNT) and A-Power Energy (NASDAQ:APWR). But both are low volume stocks rendering the overbought montor useless. Plus APWR just went to a $0 value stock after its auditors resigend and fraud is expected. Don't buy any of these stocks on technical indicators!

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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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