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The China/Biotech Buzz

It's been a very strong week for my China ideas, with several of the top choices delivering strong news and making new all time highs this week. Review and comments on the hot China ideas below.

Biotechs are buzzing right now, and a great number of small cap/biotech stocks are trading really well. Last year I delivered you two big wins in the small stock/biotech arena. 

Last year I brought you Cel Sci (AMEX: CVM) at $.59 on June 13th. Since that day, the stock has been as high as $1.88 (where I recommended a sell), and currently around $1. Also, penny stock Biocurex (OTC BB: BOCX) was featured at $.07 on September 9. Since that day, the stock has seen a high of $.28, and is currently at $.11. 

If you want to figure the returns, you do the math. Any way you look, those have been nice wins unless you made the mistake of buying at the top.

So, needless to say, I like this theme of buying beaten down biotech with some catalytic events in place that can put a charge into the stock. Here's where I'm going. I've found one along the same lines I really like, and I'll be introducing it while it's still cheap some time next week. Want a football metaphor? This stock is like Kurt Warner- former Super Bowl MVP for investors, looking to return to his former form.
 

The China Update: Great Action This Week

Going to my top hot China stock ideas, we've had some nice action this week, and we're currently in a slight corrective phase. After the moves some of these stocks have made just in January, I'm far from surprised to see them take a slight breather.

Here's some noteworthy news coming out of my top China picks:

• On Monday China Recycling Energy (CREG) announced it would complete Phase I of the Erdos project in Q1, which means Q1 is going to be a blockbuster quarter for the company. The off balance sheet and non dilutive financings the company announced for Phase II and III in December keeps this one rolling for sometime. CREG responded by trading to a new all time high of $4.95 yesterday, and has pulled back a bit today. Technically, the ideal entry level if you ever see it at $4.15, or about $3.60 in a really big market wide correction. Making nearly $5 gets us to a cool double on this stock since introduced back on October 19.
• Tianyin Pharma (AMEX: TPI) made a new all time high yesterday. The company had two significant announcement. First, TPI announced their quarterly dividend of $.025 will remain in place. Shareholders of record will on Jan 29 will get a $.025 cash dividend. Not a big yield, but demonstrates the company is making more money than it needs to keep. Secondly TPI announced it has received two approvals from the Chinese version of the FDA for it's antibiotics. These two news items had the stock trading to a new all time high of $5.25 yesterday- a cool 46% above the entry level on October 6th. Nice. Today- backing off a bit to $4.80.

Yesterday Beijing time, the Chinese government raised the required reserve ratio for Chinese Banks by 1/2% in an effort to get out in front of any possible inflation. A few months ago everyone was worried about recession. Now everyone's worried about inflation.

This move will make loans a little less easy to come by, and perhaps cool off any excesses in the economy. And, of course, the gurus are now all squawking about inflation. The Chinese economy will continue to grow for a couple of decades. That's it. There's too many people with nothing, and they all want stuff. Think the US in 1959 with 28 times the people and a highly efficient government. That's the investment opportunity.
 

Looking For A Trade? Here You Go

Looking For A Trade? Here You Go

I'm keeping a close eye on the charts, and China Education Alliance (AMEX: CEU) had a perfect technical pullback today. Here's the chart.

Until proven otherwise, this one remains my single best China ides fundamentally. I believe this stock is destined for $14 to $15. The stock made a nice move early in the week on huge volume to a new all time high of $7.48 (up 34% above my 10/14 entry level of $5.60). 

The stock has come down hard today on lighter volume than it took to drive it up. I don't know why. Perhaps some momentum players decided the market was getting heavy, or perhaps some investors believe the move to tighten for the banks will make student loans hard to get. Not likely.

If you like Fibonacci Retracements as I do, CEU completed a nearly perfect and very short term 61.8% retracement today. The stock traded slightly below the $6.72 level, and immediately bounced to the current price of $6.90.

Barring a bigger sell off in the market, I don't think this stock wants to trade much below $7 in the near future. It did a quick retracement and bounced hard today. 

Could be good for a trade, and certainly destined to trade above yesterday's $7.48 number. I believe the company could hit $1 in EPS in 2010. 

And, that's the news for today.

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