Jesse Livermore says it better than me and he is a big part of the reason why I study chart patterns so intensely. Stock charts organize human behavior in patterns that allow us to anticipate future moves based on past results. Based on this assumption, I wrote a post last October titled: Is Shanghai a Nasdaq Déjà vu

I compared the 1929 Dow Jones to the 2000 NASDAQ (as many have before me) and then the 2000 NASDAQ to the 2007 Shanghai Composite Index. The three looked so eerily similar that I knew I had to write an intense post with excellent graphics to back up the possibilities. The entire post is pasted below or can be found on the link above. This is what I had to say about the future developments of the Shanghai Composite Index based on my studies of 2000 and 1929:

This won’t happen overnight but human nature always repeats so expect a huge decline in the Shanghai Stock Exchange within the next several years.

“The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements” – Jesse Livermore

Well, take a look at what has happened to the Shanghai markets since my post last October: The chart has dropped in almost an exact shape and slope as did the NASDAQ in 2001 and 2002. The index is now down more than 65% since my blog post and more than 70% since its peak.

The moral of this post (I’ll leave it to Livermore one last time):
“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes” – Jesse Livermore.

Take a look at the charts from 2007 and compare them to the charts above. Human nature!

*************October 3, 2007 Blog Post*************
The rise of NASDAQ in the late 1990’s has been compared to the rise of the Dow of the late 1920’s. Chart overlays are amazingly similar.

Image from BullandBearWise.com

Well, the current two year rise of the Shanghai Stock Exchange Composite Index looks remarkably similar to the rise of the NASDAQ of the late 1990’s and the charts below explain better than I can!

The NASDAQ rose from 1,250 to 5,132 from March 1997 to March 2000: 310% gain!
The Shanghai Stock Exchange has moved from 998.23 in June 2005 to 5,552.30 today (10/2/07): 456% gain!

As you can see, the blue line of the late 1990’s NASDAQ has moved meticulously with the Shanghai Index of today.

Will the Shanghai Stock Exchange end up with the same result as the NASDAQ of the late 1990’s. As you can see, the NASDAQ went from 1,250 to 5,132 back down to 1,192 (all within a five year period).

This won’t happen overnight but human nature always repeats so expect a huge decline in the Shanghai Stock Exchange within the next several years.

1929, 1999, 2007, etc…
***************************************

Is Shanghai a Nasdaq Déjà vu

Sector: Industrial Goods
Industry: General Contractor
52-week Price: $4.75 – $27.25

June 6, 2008 Business Wire:

“China Architectural Engineering, Inc. (CAE) (AMEX:RCH), a leader in the design, engineering, fabrication and installation of high-end building envelope systems, today announced that the Company will ring the opening bell at the NASDAQ MarketSite in New York City’s Times Square on Thursday, June 12, 2008 at 9:30 a.m. EDT. The Company will commence trading on the NASDAQ Global Select Market under the ticker symbol “CAEI” on June 10, 2008.”

Although the company has “China” in its name, 45% of its revenue comes from Australia, Dubai, Qatar, the U.S. and Europe. Business week noted that growth should last well beyond the Olympic games this year because of robust orders in foreign markets.

The company’s order backlog is said to be at $100 million or 1/5th of its current market cap, a nice card to have up its sleeve in today’s world market.

The gap-up on the chart in May on huge volume concerns me when attempting to establish a solid risk/ reward trade strategy. I would like to see the gap fill prior to entering a position but I do see support along the 50-d m.a. or even $8 per share. I am going to set-up the “ideal trade” using the current moving average so we can cover a potential pull-back to the gap-up area noted on the charts.

Potential Trade Set-up:
Entry: $7.00
Risk is set at 1.0% of total portfolio or $1,000 of $100k
Stop Loss is 12% or $6.16 ($6.00 area)
Number of Shares: 1,190
Position Size is $8,334
Risk is $0.84
Target is $13 for a 7-to-1 risk/reward ratio

Key Fundamental Numbers:
Market Cap.: $547M
Outstanding Shares: 51.1M
EPS Growth (MRQ): 178%
EPS Growth (TTM): 135%
Revenue Growth (MRQ): 76%
Revenue Growth (TTM): 50%

Earnings per Share (EPS):
$0.50 Next year, +39%; High estimate $0.64, +77%
$0.36 current year, +71%
$0.21 last year, +50%
$0.14 previous year

Sector: Services
Industry: Advertising
52-week Price: $5.27 – $23.00

The stock is starting to pull back to the 50-day moving average which will offer us a solid entry opportunity with an excellent risk-to-reward ratio. If my swing target method can offer any accuracy whatsoever, we could be looking at a 10-to-1 risk-to-reward trade. A buy in the $16 to $17 area could also provide us a 5-to-1 risk-to-reward ratio assuming it can get back to $23 without violating the stop.

Not bad if you ask me. I will be taking on the trade if it drops below $17 and holds support at the 50-d moving average. Maybe it will work, maybe it will flop. As I say every time (like a broken record): take the trade and follow the rules. That’s all we can ask!

Take a look at some previous posts I have made with VISN highlighted:

Hot Momentum Stocks

A couple more HOT momentum stocks:
VISN – 22.53, VisionChina Media Inc. has also been tearing up my nightly screens but it slipped past any and all ideal entry points for me as a trend trader. It is now in the hands of the day traders with a year-to-date gain of 146%, a 148% gain over the past three months and a 42% gain over the past month.

Top Rated Stocks

Other High Rated Stocks in my System:
VISN – 18.88, VisionChina Media, Inc.

Potential Trade Set-up:
Entry: $16.00
Risk is set at 1.0% of total portfolio or $1,000 of $100k
Stop Loss is 10% or $14.72
Number of Shares: 781
Position Size is $12,500
Risk is $1.28
Target is $30 for a 10-to-1 risk/reward ratio.
A move back to $23 with a buy at $16 would be a 5-to-1 risk/reward trade.

Institutional Analysis:
Held By Institutions: 43.21%
Total Held by Institutions: 48
Money Market: 29
Mutual Fund: 17
Other: 2

New Positions: 27
Positions Sold: 8
Shares Held: 36.97M
Shares Held Previous Period: 32.43M

Shares Bought: 6.82M
Shares Sold: 2.32M
Value of Shares Bought: $133.2M
Value of Shares Sold: $45.19M

Top Institutional holders; Shares Held:
Oz Management, L.L.C.; 13,219,708
Goldman Sachs Group Inc; 5,366,726
Columbia Wanger Asset Management, L.P.; 5,242,328
Columbia Acorn Select Fd; 2,850,028
Columbia Acorn Fd; 1,250,000

Key Fundamental Numbers:
Market Cap.: 1.29B
Outstanding Shares: 68.4M
Float: 37.6M
P/E (trailing): 78.83
P/E (forward): 21.66
ROE: N/A
ROA: N/A
PEG Ratio: N/A
EPS Growth (TTM): 143%
EPS Growth (MRQ): 285%
Revenue Growth (TTM): 471%
Revenue Growth (MRQ): 304%

Net Income (thousands):
FY 2007: $9,393
FY 2006: $(4,069)
FY 2005: $(416)

Revenue (thousands):
FY 2007: $29,386
FY 2006: $3,873
FY 2005: $291

Earnings:
FY 2009: $0.87E
FY 2008: $0.58E
FY 2007: $0.17

Company Overview:
VisionChina Media, Inc., through its consolidated affiliated entity, China Digital Mobile Television Co., Ltd., provides advertising services in the People’s Republic of China. It operates out-of-home advertising network using real-time mobile digital television broadcasts to deliver content and advertising on mass transportation systems. The company’s mobile digital television advertising network delivers real-time content provided by the local television stations.

SOL – 27.80, ReneSola Ltd. was up 6.76% Monday on volume 325% larger than the average. I told you last week that this was one momentum stock you should not ignore. It’s now up almost 30% in three days after my Thursday morning post. It was up 15% last Wednesday, one day prior to me highlighting the stock which is why I will repeat that stocks in motion typically stay in motion (simple physics – right).
5/14/08:

Renesola Ltd (SOL), $21.67, is on fire over the past several weeks since its IPO debut in January. Volume has been exploding as the stock is up almost 200% since it’s low in late March. I have been watching the stock as it has crossed dozens of nightly screens but decided not to post it to the blog until now.

If you want momentum, SOL is currently providing it. The stock was up more than 15% today on volume 409% larger than the average. At least 11 accumulations days have occurred over the past month as the stock started to log new all-time highs.

A couple more HOT momentum stocks:
VISN – 22.53, VisionChina Media Inc. has also been tearing up my nightly screens but it slipped past any and all ideal entry points for me as a trend trader. It is now in the hands of the day traders with a year-to-date gain of 146%, a 148% gain over the past three months and a 42% gain over the past month.

CSUN – 13.06, China Sunergy Co. is now up more than 47.74% over the past month but is still down 20% from my original 2008 post of $16.15 on January 4, 2008 (however, I did state: Ideal Entry: $12.00). The three month gain is 80.93% with a peak of 97% – I timed this one wrong but saw the trending potential back at the turn of the year. Patience – a must in this business. CSUN did reverse Monday – the first red flag in May.
1/4/08:

China Sunergy (CSUN) is part of a booming solar industry that includes stocks such as the ones listed below; all head lined by FSLR, a stock that is up more than 700% over the past year or so.

FSLR – $265.87
STP – $88.22
SOLF – $36.95
YGE – $38.02 (another stock I am looking to add)

One last word: watch the daily action because the summer months are coming – sell off time (hint, hint). Have all stops set and always look for red flags! Enjoy the momentum while it lasts but NEVER let a solid gain slip away.

JASO – 24.83, JA Solar Holdings is currently trading in the handle portion of a cup with handle base (one of the prime setups in the CANSLIM philosophy).

• Portfolio Snapshot: Growth
• Highest Rated IPO’s
• JASO Cup with Handle Breakout
• China Super Stars
• Fresh IPO Ideas
• Recent IPO Updates

EDU – 80.08, New Oriental Education & Technology Group has come a long way since its correction down to the mid-$40 range. It closed above $80 on Friday and is now back within 15% of a new all-time high.

• Portfolio Snapshot: Growth
• Friday Morning Education (EDU)
• It Pays to Learn English
• China Super Stars
• Weekend Trender – EDU
• Intercontinental Education – The 20% Rule?
• Learning about New Oriental Education (EDU)
• EDU Breakout on Huge Volume!
• Intercontinental Education – The 20% Rule?
• Top 10 Stocks to Watch: Trend Buys

GU – 17.00, Gushan Environmental blasted 22.39% higher last week on above average volume as it closed at a new all time high.

• Portfolio Snapshot: Growth
• Gushan (GU) Making a Move
• The Next Chinese IPO – GU

TITN – 23.52, Titan Machinery is starting to flirt with all-time highs as volume is increasing during accumulation weeks

• Portfolio Snapshot: Growth
• Young Stocks Moving on Volume
• Titan Machinery (TITN)

If you want momentum, SOL is currently providing it. The stock was up more than 15% today on volume 409% larger than the average. At least 11 accumulations days have occurred over the past month as the stock started to log new all-time highs.

The stock is the latest in my pursuit of profits in Chinese, Solar and IPO combinations over the past 12-15 months. JASO was the original poster-child but SOL is now catching my attention. I don’t own shares as of this writing but that could change on the proper entry opportunity (I don’t have one at this time but I will update if and when it happens).

ReneSola, Ltd., through its subsidiaries, engages in the manufacture and sale of solar wafers and related products in the People’s Republic of China. It offers feedstock, ingots, and wafers for the solar industry. The company sells solar wafers to Chinese and international PV cell manufacturers.

Fools like Cramer and CNBC said the stock was under the radar until today but readers here have known it was out there and has potential in the upcoming year. It touches upon a few hot topics and stock drivers from the past couple of years: energy, china and IPO’s. Three categories that are not unfamiliar on this blog (especially in 2007). It does scare me that Cramer (profit jinx) mentioned Gushan today but I will ignore the superstitions and continue to follow the stock while grabbing shares.

A second firm from Wall Street decided to initiate coverage on the stock with a buy recommendation. I labeled the stock a buy the day it debuted and maintain that analysis based on my fundamental and technical research:

“The Next Chinese IPO:
Now it’s time to jump on the next IPO that’s about to debut on New York Stock Exchange under the symbol “GU”. Chinese biodiesel fuel producer Gushan Environmental Energy Ltd. (GU) said it plans to raise about $171.6 million in an initial public offering of American Depositary Shares (ADS).”

Earnings Estimates:
FY 2007: $1.02E
FY 2008: $1.52E +49%
FY 2009: $2.00E +31%

Revenue (in millions):
2002: 5,258
2003: 10,422
2004: 23,793
2005: 49,840
2006: 113,891

Net Income:
2002: 2,080
2003: 5,361
2004: 10,245
2005: 21,069
2006: 45,972

PEG Ratio: 0.77x
P/E Ratio: 38.49

Why the surge today? The stock seemed to be following a surge in the Shanghai market.
Another stock of related interest higher today: YGE, up 13.38% on volume 60% larger than average66666666666666666666666
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Sector: Technology
Industry: Semiconductor (Solar)
52-week Price: $4.83 – $19.23

2007 “Stock of the Day” stocks gained an average of 43% (32 total stocks).

China Sunergy (CSUN) is part of a booming solar industry that includes stocks such as the ones listed below; all head lined by FSLR, a stock that is up more than 700% over the past year or so. This industry is said to grow from about $15 billion to more than $69 billion over the next 5-10 years. Growth like that will flow down to the group leaders such as the ones below. FSLR, STP and YGE are currently the leaders. I am actually looking to get my hands on a few shares of Yingli Green Energy Holding (YGE) and will present a case study analysis (stock of the day) next week. The next pullback will be the ideal entry and that looks to be coming over the next several weeks (an entry between $30 and $35 is looking fine). Enough of YGE!

China Sunergy Co., Ltd. and its subsidiaries engage in the design, development, manufacture, and marketing of solar cells in China. The company manufactures solar cells from silicon wafers utilizing crystalline silicon solar cell technology to convert sunlight directly into electricity through a process, known as the photovoltaic effect.

The is my first Chinese stock coverage of the new year, extending a trend that was very successful in 2007 with stocks like BIDU, JASO, EDU, MR, PTR and FSLR. I don’t know if CSUN will follow through but the company looks interesting. However, the more I do this analysis tonight (Thursday night), the more I like YGE.

Recent revenue, net income and future earnings all catch my attention and can play major roles in the driving force of the stock’s future price.

Sister Stocks (Top Rated Industry by IBD):
FSLR – $265.87
STP – $88.22
SOLF – $36.95
YGE – $38.02 (another stock I am looking to add)

Potential Trade Set-up:

Ideal Entry: $12.00 (currently $16.15)
Risk is set at 1.0% of total portfolio or $1,000 of $100k
Stop Loss is 12% or $10.56
Number of Shares: 700
Position Size is $8,400
Risk is $1.44
Target is $27 (based on former peaks and bottoms)
Reward-to-Risk is 9-to-1 with ideal entry, much less with current price

Institutional Analysis:
Held by Institutions: 36
Money Market: 29
Mutual Fund: 6
Other: 1

New Positions: 15
Positions Sold: 16
Shares Held: 4.70 mil
Shares Held Previous Period: 4.83 mil

Shares Bought: 3.4 mil
Shares Sold: 3.5 mil
Value of Shares Bought: $60.8 mil
Value of Shares Sold: $63.2 mil

Top Institutional holders; Shares Held:
Citadel Limited Partnership; 1,511,891
Credit Suisse; 780,922
WRA Investments, LLC; 350,000
F&C Asset Management PLC; 349,800
AXA; 230,000

Key Fundamental Numbers:
Market Cap.: $667.97M
Outstanding Shares: 39.56M
Float: N/A
P/E (TTM): N/A
PEG Ratio: N/A
Price to Sales Ratio: 2.99x
Price to Book Ratio: 3.84x
Total Debt/Total Capital: 41.79%
Quick Ratio: 1.52x
Operating Profit Margin: 5.46%
Net Profit Margin: 3.38%
3-yr Sales Rate: 416%

Earnings:
Yearly (2009): $0.43E
Yearly (2008): ($0.06E)
Yearly (2007): ($0.16E)

Quarterly earnings are expected to go from ($0.14) in Q2 of FY07 to $0.02 by Q4 FY08 with progressive increases each quarter. The company did miss analyst targets for Q3 FY07 but the future still looks brighter.

Revenue (millions):
Yearly (2006): 149,521
Yearly (2005): 13,750

Net Income (millions):
Yearly (2006): 11,814
Yearly (2005): (306)
Yearly (2004): (959)

Next Up: YGE (a much stronger chart in my opinion)

Of the five Chinese stocks I have owned, JASO has been the top performer in my portfolio from start to finish. BIDU is a close second and would have been first by a long shot if I had held the entire time. The others are MR, PTR and EDU.

The Next Chinese IPO:
Now it’s time to jump on the next IPO that’s about to debut on New York Stock Exchange under the symbol “GU”. Chinese biodiesel fuel producer Gushan Environmental Energy Ltd. (GU) said it plans to raise about $171.6 million in an initial public offering of American Depositary Shares (ADS).

According to an SEC filing, Gushan is selling 15 million ADS, and a group of selling shareholders is offering 3 million ADS. Each ADS represents two ordinary shares. Gushan expects the offering to price between $11.50 and $13.50 per ADS (assume $12.50 per share to equal the $171.6 million mentioned above).

The company plans to use a majority of the IPO proceeds to expand its production capacity by buying manufacturing equipment and constructing additional facilities. Remaining proceeds will be used for research and development efforts and for other general corporate purposes.

According to an Associated Press article, Gushan is the largest biodiesel producer in China in terms of annual production capacity in 2006. The company produced and sold 136,587 tons of biodiesel in the first nine months of 2007, and aims to increase annual production capacity to 400,000 tons by the end of 2008. An increase of almost 200% (something that peaks my interest).

What is Biodiesel?

Biodiesel is a renewable, clean-burning and biodegradable fuel produced from feedstocks such as vegetable oil, animal fat and recycled cooking oil. Typically blended with diesel fuel, biodiesel is used in the diesel engines of trucks, mass transit vehicles, ships and generators. Additionally, the byproducts of biodiesel production have numerous commercial applications in the food, pharmaceutical and manufacturing industries.

For the nine months ended Sept. 30, the company reported income of $33.4 million, compared with $36 million in the prior-year period. Revenue for the period rose to $98.3 million from $81.5 million in the first nine months of 2006.

Merrill Lynch & Co. is serving as lead underwriter of the offering. CIBC World Markets and Piper Jaffray are also underwriting the IPO. The selling shareholders have given the underwriters the option to buy up to 2.7 million additional ADS at the offering price to cover any overallotments.

Competitors:

• China Biodiesel International Holdings
• East River Energy Resources
• SINOPEC
• CNOOC
• PetroChina

Tuesday Update (I wrote this piece over the weekend):
Chinese biodiesel producer Gushan Environmental Energy Ltd on Tuesday raised about $173 million with an initial public offering that priced below expectations. (Not Good – this sector is getting hit over the past week)

The 18 million offering of American depositary shares sold for $9.60 apiece, compared with a forecast range of $11.50 to $13.50, according to an underwriter.

My View on Chinese Stocks in General (12/19/07):
I understand that the Chinese market is currently in the middle of a bubble type run but who is to say when that bubble will end. Bubbles can last a lot longer than many believe. You can try to predict when it will end but I will continue to trade it until is really ends! I’ll let you know where I get in and how the trade sets up. I am five for five with Chinese stocks in 2007 so why not jump in and grab another. I had people tell me I was crazy ten months ago when I was buying stocks like EDU and MR (bought JASO and BIDU a few months later).

The stock may or may not work but I trade opportunities, not predictions! What do you trade?

The stock made it’s debut in a post where I asked the question:
Is SSRX the Next JRJC

A run to $30 is not out of the question based on the recent infatuation with Chinese stocks (similar to our tech stocks of the late 1990’s).

I will look to grab a small position in the AM tomorrow (keep my exposure low due to a lack of an ideal risk/reward setup).

SSRX then went on to make a screen titled, IPOs on the Move which I uploaded earlier this week at $18.60.

SSRX – 18.60, the stock has popped 16% in early morning trading as it breaks the recent five day consolidation range. It is back within striking distance of new highs. Early morning volume is 1,500% larger than the average.