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5 Chinese Stock Trades With Breakout Potential


Things are looking a lot less bullish for shares of Sina (SINA - Get Report), a stock that's been stuck in a downtrend for most of the last year. Since mid-April, shares of the $4 billion online media company have halved.

There's a big difference, though, between a stock being in a downtrend and merely moving down. That difference means that we have a tradable setup in shares of SINA right now.

In a downtrending channel, the key difference is the fact that shares are bounded by trend line support and resistance levels, a price ceiling and floor for shares that restrain price action within a tight, predictable range. That predictable range means that traders have a way to determine the risk/reward tradeoff on a setup like SINA.

Because it's in a downtrend, SINA is a short candidate with an optimal entry near the stock's resistance level. The ideal time to buy is on a bounce lower off of trend line resistance with plans to sell as shares approach trend line support. Yesterday's sharp price action lower is a good bounce. Traders who bet on SINA to move down the channel should keep a protective stop just on the other side of resistance.

Sina shows up on a list of Best Chinese Stocks for 2012.

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ZNH $31.03 -0.42%
CHL $57.12 -2.00%
LFC $11.42 -2.00%
YZC $5.66 -1.90%
SINA $50.05 -0.62%


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