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Risk appetite is back, China stocks move

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risk_1 June 30, 2011 (Chinavestor) Tiens Biotech (AMEX:TBV) may lead the overbought monitor this morning albeit low volume renders technical indicators inaccurate. For this reason China Mobile (NYSE:CHL) and Melco Crown Entertainment (NASDAQ:MPEL) are the most interesting Chinese stocks on the top of the overbought list for Friday. Additional stocks of interest include China Telecom (NYSE:CHA), Sinopec (NYSE:SNP) and Guangshen Railway (NYSE:GSH). Chinese airliners were on fire such as China Southern Airlines (NYSE:ZNH) and smaller rival China Eastern Airlines (NYSE:CEA). China Automotive Systems (NASDAQ:CAAS) fell over 10% after a spectacular rise reminding investors that profit taking can hurt trading stocks badly.

Investors turned to large cap, value stocks as the Greek drama unfolded, helping spur stocks like China Telecom (NYSE:CHA) or China Mobile (NYSE:CHL). While their upside is still not limited, the pace of advance is expected to slow significantly as risk appetite is back in town after the passage of the latest Greek austerity measures.

China Automotive Systems (NASDAQ:CAAS) has been an excellent trading stock, similar to Melco Crown Entertainment (NASDAQ:MPEL) in many respects. Both have large volume and high beta, making them ideal for short term trading. But the latest fall of China Automotive Systems (NASDAQ:CAAS) is yet another reminder that stocks can go down, not just up.

Sinopec (NYSE:SNP) is an energy stock that enjoyed falling oil prices, along with China Southern Airlines (NYSE:ZNH) and smaller rival China Eastern Airlines (NYSE:CEA). Refining margins improve for Sinopec (NYSE:SNP), China's largest refiner, when crude is falling, explaining the latest surge on the overbought monitor. But that is about to change as world wide rally and a weaker dollar helps commodity stocks but hurts upstream oil companies like Sinopec (NYSE:SNP). The same is true for airliners; high oil translates to high kerosene prices thus hurting profitability. None of these stocks are expected to extend latest rally.

OB_2011630

There is no change among oversold stocks for Friday. Cleantech Solutions (NASDAQ:CLNT) and A-Power Gen. (NASDAQ:APWR) are oversold but their low market cap and no volume renders their technical reading useless. The most important information of the oversold monitor is that there is no oversold China stock with sufficient volume that was ready to pop.

OS_2011630

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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