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Buy Alert: China Small Caps Explode

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July 07, 2011 – Comments (0) | RELATED TICKERS: BIDU , SINA , YOKU

Money flow continues to follow the standard path. Large caps, mid caps, then finally small caps. Chinese large caps have bounced sharply over the last few weeks. Stocks like Baidu.com, Inc. (NASDAQ:BIDU) have bounced 30% while SINA Corporation (NASDAQ:SINA) has bounced over 50%. These bounces look to be mostly completed as the large caps have stalled out.

In the last two weeks, mid caps Chinese stocks have also taken off. Major moves have jumped in from the likes of Youku.com Inc (NYSE:YOKU), which is up 45% and Renren Inc (NYSE:RENN) which has bounced almost 100%. The key with these bounces is to notice how the money flow started at the most secure, safe China stocks and has rotated down the list. Large caps, mid caps and now, finally, small caps.

Chinese small caps are seeing a surge today, probably the beginning of a bigger run. Many are sitting at their 52 week lows still, with drops of 75% this year. A few key ones to watch are CDC Corporation (NASDAQ:CHINA), Kandi Technolgies Corp. (NASDAQ:KNDI) and Sino Clean Energy Inc. (NASDAQ:SCEI).
I wrote about Chinese small caps being the next big play in the swing trade market and today many are surging more than 10%. The money rotation here is the key. Just to name a few that are jumping, AOB is up 15%, CPSL is up 15% and CSKI is up 11%.  While these carry risk, most likely more upside is around the corner as they catch up to the gains from the large and mid cap China stocks. Lock and load. Enjoy the ride.

Gareth Soloway
InTheMoneyStocks.com

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