HK Stock Picks for 08-14-08 (2600,2866,323,1200)  

Hang Seng Market Overview:

Temporary Support Found?

Hang Seng Index’s performance today is commendable. First, it didn’t gap down (which is normally what I would think it would do considering its weak performance for the past couple of days whenever Wall Street falls more than 1%.) Intraday, Hang Seng was basically just hovering between a range of 21,400 to 21,100. The nice thing is that it closed up and most of the stocks, especially the basic materials staged their first uptick for a very convincing follow through rally the next day. The move is very much connected to the rally of energy stocks in the US with the first uptick of oil prices from $114 to $116. To understand the strength of today’s performance of Hang Seng, consider the volume and value traded of 2600.HK also known as Chalco for today. In my view, HSI is likely to tread higher tomorrow and this will already mean about 5-6% gains potentially made in a single day.

Recommendation: Start probing especially with the most beaten down stocks. Those that fall fast will recover violently once the Wave 4 Elliot Wave rally comes. While HSI is still undergoing a correction, beaten down stocks have been resting in their support levels (e.g. 200.HK, 2866.HK, 1200.HK, 2600.HK).

Stock Picks:

All the stock picks were chosen mainly because they broke out from fast downtrend channels. I am trading this for the short term. A move from 2 to 3 is already 50%. I am choosing the most beaten down stocks whose prices are all about down 80% from its high (meaning it has really underperformed the whole market.) I am playing for the worst of the crop (ones I like to call abandoned beauties). I repeat that I am not catching falling knives. The trading patterns from the charts will illustrate what I mean. I am merely here for the short term bounce which is usually a sizeable return. Think about the Philippine bear market rally in the Philippines and you will understand that a move of MEG from 1.14 to 1.72 is already worth 50%. That is the kind of stock that I am looking and trading for.

Summary of Stock Picks: (Viewable through google docs just above this blog post.)