China bottoming, BIDU and the new BIDU

Shanghai appears to be forming a long term bullish head and shoulders pattern.  Roughly a 30% move.  The key weekly moving averages have flattened and are in prime position to turn higher.  Let's take a look at some of the ways to play it.

I'm intrigued by BIDU.  What had been the ultimate China stock.  It has consolidated for a couple of years now since the highs around 165.  At first blush who wants to buy a stock that fell from 165 to 80?  Any reasonable person would have some doubts about it.  The key is long term perspective.  In 2008 BIDU traded at a split adjusted price of 10.

Note the angle of the ascent from 08'-11' versus the angle of descent in the decline since the highs.  The rise is clearly the sharper angle.  Whenever that's the case in a stock; it's bullish.

I'd argue that 80 level is a multi-year bottom.  Over the orange resistance line we could see at least a test of the 2011 highs


SINA is very similar to BIDU in that it has a very bullish trajectory and price appears ready to start a new up trend.

Here is the daily chart of SINA.  It has just reacted very well to the gap up.  It's hard to argue that that gap would close any time soon.

VIPS is an online clothes retailer.  It is this year's BIDU.  It has just been on fire while most other China stocks have been consolidating.  Earnings have been strong of late and are beating expectations.



This is a great example of how RSI divergences sometimes mean nothing.  If you had followed that method for determining your exit, then you were out around 12.  Uhh YO!


DANG has nearly doubled off the lows around 3.75 in just a few weeks.  Incredible stuff.  Is it over?  I don't think so.  Let's again add some longer term perspective.  It appears there is some room to test the 10 level and possibly even the fib clusters around 15.50 and 19.

I have to point out that in late 2010, when the company first IPO'd, they did an interview on CNBC from their headquarters and it appeared they were a scam working out of some over-sized 2 car garage in Beijing.  

The important thing to remember is, that even though this may be some B.S. company, it could rally up to 10, 15 or 19 and still be in a strong long term downtrend.

Lastly I'd like to point out this chart/discussion is just to help make a point; I personally would just never buy this.

So you can see there are plenty of ways to play this potential raging bull in China.  The main players are shaping up and seem to be confirming the bullish possibilities shown in the Shanghai chart.

My favorite idea is VIPS.  That is just some fantastic strength in that stock.  However, it is hard to find things not to like about BIDU and SINA longer term.