I took todays strength as an opportunity to hop back into some of the deeply depressed Small Cap Chinese stocks that we have previously been trading and covering here at ttt.net.
First stock i’m taking a shot as is China Natural Gas that we first started covering here back around $3-4/share in June of this year before it made its huge run above $15 which gave us several opportunities to capitalize on profits. CHNG is expecting 70% growth into 2008, has a great looking balance sheet with a strong current ratio of 3.17 and zero long term debt. CNG stations are continuing to expand at a rapid rate providing more and more income for CHNG. Looking at the chart here we can see this has had a huge sell-off bring price back down to support in the $7 range at horizontal support. Since May, looking at the RSI indicator we can see that every time it dipped below 30 and became over sold a significant rally has taken place. Lets hope we get somewhat of the same effect this time around. More information can be found on CHNG.OB in the Message Boards from previous analysis.
long CHNG 8.15 (1/2 position)
Second Stock i took a small 1/4 position into today was CDS. This particular stock carries slightly more risk for the short term period as earnings are announced tomorrow morning before the opening bell. I usually don’t carry stocks through earnings but i believe CDS, among most chinese stocks, will be up to par with there estimated earnings. Giving CDS’s estimates of .67 eps for 2008 and some stabilization in the markets i believe this has a future fair value in the mid teens. Technically this stock made a false breakdown of horizontal support and the 50ema. False signals are sometimes the strongest signals of reversal.
More info from past analysis on the message boards.
Long CDS 8.10 (1/4 position) Earning out Pre-Market. Heads up!
Third stock i’m placing a bet on…. Yet again ahead of earnings breaking my trading rules….. DOH!! let me emphasize the risks involved such as when i took a hit from MENT’s un-warned earnings call and a 12% pre-market drop. The difference here is that we’re talking small cap chinese stocks. Chinas growth has been accelerating during the period of the upcoming results for Chinese stocks, making it a lot more probable that they will meet expectations. Along with the market oversold, a better chance that these small cap chinese stocks will possibly rally rather than tank on positive results. Either way its a gamble, and is why i’m not betting my full positions on this stocks. I took a quarter on CDS, I’m betting 1/2 on CHLN due to the fact it didn’t rally with todays market and am expecting positive results through tomorrows earnings followed by a rally. Technically price formed a doji candle right at heavy support today giving this Candle stick reversal pattern a more likely chance of following through. CHLN expects 1.21 eps in 08′ giving them a very attractive forward PE of just 4x earnings. Again, more information from previous analysis on the message board.
Long CHLN 5.20 (1/2 position)
Keeping an eye on:
SDTH
CHME
CPHI
GBT
