Monday, May 16, 2011

Sina's (SINA) Breaking Down so Tread Cautiously

While still finding Sina (SINA) very attractive in the long run, I would advise those speculating in the shares to be careful at this moment.  Much like silver, Sina turned to a momo play (based on valid fundamentals) and that attracts a whole new breed of "investor".  Once the momentum breaks, they leave en masse and with such sharp run ups (silver or Sina) you don't have much underlying support.  While I was a little early in the first week of April, taking some profits along the way never hurts.  I can tell you from the amount of web hits my Sina stories have been receiving the past 45 days versus 6-8 months ago, this name is no longer under the radar.  Further, the broken IPO of (cough) "The Facebook of China" shows slowing momentum in this group.

While I loved Sina's valuation with the undervalued Weibo story back in late 2010, I could not get behind the valuation over the past month and urged caution.  While those who never owned it or wanted to add to shares, had a reasonable area to "take a shot" on the long side just above the 50 day moving average last week, that trade is broken as of Friday when that level was severed.   Now one hopes for a chance down there in the $80s, which would be a much more attractive entry point from a valuation point of view.  The 100 day moving average is exactly at $100 so that's another area one might want to take a stab as that level provided support in mid March.  And yes, I expect another run up in the coming quarters.  But near term... prognosis not so good from this set of eyes, although the stock is fast approaching oversold levels and some sort of dead cat bounce should occur in the next 3-6 sessions.  What happens after that will be the key.

[click to enlarge]

Ironically, Mr. Cramer pumped the name April 14th within days of its peak .... just as he pushed the retail crowd in, Mr. Goldman Sachs downgraded the stock exactly a week later.   (nailing the top)  Ah, you have to love the herding behavior of Wall Street....

[Feb 18, 2011: BW - A Twitter Knock Off has China Talking
[Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
[Dec 9, 2010: The Twitter of China - Weibo]

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