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Small cap rally, large cap profit taking

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cash1 March 4, 2014 (Chinavestor) While markets were preoccupied with the Ukrainian crisis, selected Chinese stocks continued to advance. Small cap E Commerce China (NASDAQ:DANG) rose 5.7% while China BAK Battery (NASDAQ:CBAK) surged 7.55%. Larger Youku Tudou (NYSE:YOKU) advanced $.73 or 2.2%, the most among the most liquid Chinese ADRs. Huaneng Power International (NYSE:HNP), China's largest independent power generator, rose $.58 or 1.64%. Sohu.com Inc. (NASDAQ:SOHU) advanced despite an overbought position earlier the week and Chinese telecom listings, China Mobile (NYSE:CHL) and China Telecom (NYSE:CHA), made a comeback, too. Chinese oil companies fell universally. CNOOC Ltd. (NYSE:CEO), China's offshore oil specialist, declined $1.84 while Petrochina Co. Ltd. (NYSE:PTR) fell $.61. Sinopec (NYSE:SNP), China's largest oil refiner, declined $1.22 or 1.38%. Investors locked in profits at Baidu Inc. (NASDAQ:BIDU), Sina Corp. (NASDAQ:SINA), WuXi Pharmatech (NYSE:WX) and Crip.com International (NASDAQ:CTRP). The following chart displays medium and larger, liquid Chinese stocks that moved the most on the first trading day of March. Market capitalization is represented by the size of the bubble. Interestingly, Sohu.com Inc. (NASDAQ:SOHU) is still among those stocks that advanced despite a record three day rise earlier. Sohu is now up over 15% in the last five days.

mover_20140303

Big moves a day doesn't necessarily translate to an overbought or oversold position. Sohu.com Inc. (NASDAQ:SOHU) is the second on top of the overbought China stock chart. While the stock moved just a tiny $.18, it is still overbought. The stock leveled off on Monday but is still way too close to overbought position and the pace of advance, represented by the size of the arrow, is way too big.

Besides SOHU, E Commerce China (NASDAQ:DANG) is considered overbought. DANG surged 48% in the past five trading days and such an advance is highly unusual. The pace of advance slowed down on Monday, DANG rose $.96 or 6.47% on Monday.

China BAK Battery (NASDAQ:CBAK) surged 74% in just three days... but such advance is attributed to a very low base. The stock rose $.28 or 7.55% on Monday.

ADR_OB_03042014

Chinese education stocks continue to lead the China ADR Index lower. New Oriental Education (NYSE:EDU) bounced back on Monday but is still oversold. Xueda Education (NYSE:XUE) continued to decline on the first trading day of the month.

SouFun Holdings (NYSE:SFUN) and China Telecom (NYSE:CHA) were among those few advancing Chinese stocks and are not considered overbought as a result. Sina Corp. (NASDAQ:SINA), a stock that fell $1.04 or 1.52% and is among those larger stocks that are recorded on the first chart, is also on the oversold chart below. But make no mistake, Sina Corp. (NASDAQ:SINA) is not considered oversold by any stretch of imagination.

Baidu Inc. (NASDAQ:BIDU) succumbed to profit taking on Monday along with WuXi Pharmatech (NYSE:WX), but are not on the oversold China stock list. Petrochina (NYSE:PTR), CNOOC Ltd. (NYSE:CEO) and Sinopec (NYSE:SNP) are also absent from the following chart.

ADR_OS_03042014

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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