China is the world's sleeping giant. While opinions range from outright negative to overtly positive, the charts give the best sense of what opportunities exist since they capture the true opinions of investors and traders through price.
The Morgan Stanley China A Share Fund
(NYSE:CAF) is a good proxy and trading instrument for mainland China shares, although more volume would be preferable. A glance at the daily chart shows a nice bump up in mid-November followed by consolidation and a further break to the topside on Thursday of last week (denoted by the red upward arrow). Now it is starting to extend even higher.
Consolidations after a surge in volume and price tend to lead to further gains, and this is starting a range trade break now. The weekly chart confirms the bullish view with a breakout over a prior swing point high three weeks past and now another swing point break last week. Multiple swing point breaks can lead to fast moves in the direction of the breakout.
With more and more economic reports confirming that China is starting to fire on most cylinders again, these charts simply reflect that underlying strength. One could simply buy the broader indices and look for individual stocks within the indices that are exhibiting above average strength. One such sector is the lodging sector. Take a look at these two examples.
A better-known name in the lodging sector is Home Inns & Hotels Management Inc.
(NASDAQ:HMIN), which operates around 2,000 hotels in roughly 250 cities across China. It is still in the growth part of its curve, with triple-digit earning growth year-over-year. The great thing about its chart is each thrust higher in price is accompanied by a great number of buyers willing to pay higher and higher prices. That's outright bullish as long as it lasts.
A lesser-known name with thinner trading volumes in the same sector is China Lodging Group Limited
(NASDAQ:HTHT) which, from my perspective, exhibits an even stronger set of charts across all time frames. Here's the daily chart.
The consolidation seen here on the daily chart is just below the highs on the monthly chart (not shown), so once this level is breached, there's nothing to hold prices back anymore. They, too, are returning double-digit revenue and earnings rates year-over-year.
The bottom line remains the same -- this is a bull market, and there continues to be opportunities for both investors and traders alike where companies are actually able to expand not only the bottom but also the top lines. It's harder and harder to find great entries on domestic stocks, but China is offering up some alternatives.