I’ve been actively trading Chinese small cap stocks for several days now, ever since they popped onto my filter. In the process, I started wondering if there might be any stocks that could potentially be next and are just lagging this recent rally.It appears that when a China company decides to IPO on NASDAQ or NYSE, the stock attracts immediate attention and a lot of volume. That’s what happened with China Automotive Systems, Inc. (CAAS) and China Agritech Inc. (CAGC). Both are top performing stocks as ranked by the Investor's Business Daily newspaper (IBD). Obviously those two stocks are from completely different sectors, and there are different group leader: 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 the 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 volume and a continuation of strength in a number of other small-cap Chinese stocks, such as China Armco Metals, Inc, (CNAM). CNAM was up 13% on Friday on record volume for the stock. This created good opportunities for active trades throughout the day. Puda Coal, Inc (PUDA) was up 23% on Friday. L&L Energy, Inc. (LLEN) – up 12% Friday along with a number of others. Some lack the volume that active traders usually look for, but they might still be on the move. Those stocks could play out on the longer time frames as swing rather than intraday trades and some could be considered good investment opportunities.
I found several small cap stocks that did not really participate in the "Chinese" sector rally in the last month and I think that some of these should be on the active trader's radar. Who knows, there might another CNAM or CAGC waiting to reveal itself!
Among the many, the stock that I like the most based on the charts is presently in a very tight consolidation range, and looking to breakout. That stock is Universal Travel Group (UTA). A move above $11. 20-11.40 with volume will be a solid long, with a short term target of $14.00 and then to all-time high at $17.20.
Another small cap Chinese stock, that could be worth watching is China Direct Industries, Inc. (CDII). A potential move above recent highs at $1.85 will lead the stock above $2.00.
Also, Origin Agritech Limited (SEED) is looking great on the chart. With a hold above its recent highs at $10.56, the target will be to $11.50 and then $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 will be coming up. Be on your toes however, as things may turn around pretty quickly in this environment. It's best to be prepared.
