By: Arkady Gevorkyan
I’ve been actively trading Chinese small cap stocks for several days now, ever since they popped on my filter. In the process, I started wondering if there might be any stocks that could potentially be next and are just lagging of the recent Chinese stocks’ rally.
It appears that when a company that does business in China decides to do IPO on NASDAQ or NYSE, the stock attracts immediate attention and large volume of transactions. That’s what happened for example, with China Automotive Systems, Inc. (CAAS) and China Agritech Inc. (CAGC). Both are the best performing stocks ranked by the Investor’s Business Daily newspaper (IBD). Obviously those two stocks are from completely different sectors, and there are different group leaders (for CAAS it is Amerigon Inc. (ARGN), while CAGC appears to be a group leader itself, according to IBD. Since the beginning of this year correlation between those two stocks has been above 0.5 level, (currently it is around 0.6), which is considered to be substantial for stocks from completely different industries.
On Friday, March 5th, there was a spike in the volume and some continuation of the strength in the number of other small-cap Chinese stocks, such as China Armco Metals, Inc, (CNAM), that was up today 13%, surged on the highest volume and created good opportunities for the active trades. Puda Coal, Inc. New Common Stock (PUDA) is another one that was up 23% today. L&L Energy, Inc. (LLEN) – up 12% today and there are number of others, that could lag the volume, active traders usually look for, but still will be on the move. Those stocks could play out on the longer time frames and could be considered a good investment opportunities.
I found several small cap stocks that did not really participate in the “Chinese” sector rally in the last month. And those stocks I think could be the lagging ones that should be on the radar. Who knows, there might another CNAM or CAGC coming up!
Among the few, the stock that I like the most on the chart, that created a very tight consolidation level, and about to break out of it, is Universal Travel Group (UTA). A move above 11. 20-11.40 with the volume, will be considered as a strong long, with the short term target to $14.00 and then all-time-high at $17.20.
Another small cap Chinese stock, that could be worth to watch is China Direct Industries, Inc. (CDII). A potential move above recent highs at $1.85 will lead for the stock to trade above $2.00.
Also, Origin Agritech Limited (SEED) is looking great on the chart, above recent highs at $10.56 with the hold. The target will be at $11.50 and then at $15.00.
There are number of other small cap Chinese stocks, that could potentially be on the move, Right now, I guess it is just worth listing them, since the real trade is not there yet. They are: CHBT, CHGS, AMCF, CPBY, CHNR, CTDC, JADE, JRJC, FEED, CGA, CAST, ZSTN. And it looks like more Chinese IPO’s are coming up. But things may turn around pretty quickly in this environment. It’s best to be prepared.
