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Telecoms, internet makes a comeback

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advance8 September 15, 2011 (Chinavestor) It's hard to find liquid Chinese stocks with sound momentum these days. China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) are both trading above their trading ranges but are far from overbought. Sina Corp. (NASDAQ:SINA) was the first major internet stock among the most 25 overbought Chinese stocks yesterday. But Baidu.com Inc. (NASDAQ:BIDU) made it to the list as well, albeit it's far from being overbought but at least has made up some lost ground. Melco Crown Entertainment (NASDAQ:MPEL) is now oversold suggesting the bottom is here. The dramatic fall of China Eastern Airlines (NYSE:CEA) is captured by the oversold monitor and suggests a temporary relief is coming. But solar stocks continue to show weakness, such as Trina Solar (NYSE:TSL) or Yingli Green Energy (NYSE:YGE).

Sector rotation is helping Chinese telecoms lately. China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) have outperformed the broad market since revealing second quarter financials. Both stocks are basically unchanged since the end of 2008, making them attractive on valuation. The good news is that despite a superb last four week, the rally is not overdone according to the overbought monitor.

Sina Corp. (NASDAQ:SINA) was the first major internet stock to recover from a slump 4 weeks ago. Baidu.com Inc. (NASDAQ:BIDU) has made a comeback as well, as the following chart shows. the good news is that there is plenty of room left to the upside and when industry leaders rally, the rest will follow.

OB_2011915

Melco Crown Entertainment (NASDAQ:MPEL) has approached theoretical lows and have little downside risk at this point.

Silvercorp Metals (NYSE:SVM) continues to hurt after MW allegations sent the stock tumbling earlier the week. Despite losses, more downside is possible, according to the oversold monitor.

China Eastern Airlines (NYSE:CEA) went from $24 to just over $20 in a short period of time. While there is more room left to the downside the sudden drop suggests differently. The stock may bottom out right here...

A large number of solar stocks are present on the oversold monitor today. Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE) are some of the most visible ones besides JA Solar (NASDAQ:JASO), Jinko Solar (NYSE:JKS) or Canadian Solar (NASDAQ:CSIQ). More downside is possible despite recent losses...

OS_2011915

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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