China BlueChemical is a large-scale and modernized enterprise engaging in the development, production and sales of mineral fertilizers and chemical products. As a listed company with the largest production volume of urea and methanol in China, China BlueChemical is a subsidiary that is engaged in production of mineral fertilizers, methanol and related chemicals under the parent company, China National Off shore Oil Corporation , which is the third largest petroleum company in China. The security was heavily penalized and is now in an oversold situation near to a solid support area.

From a fundamental viewpoint, the security is cheap with a PER of 6.62x for 2012 and 5.48x for 2013. It is cheaper than the industry average. Besides, EV/Sales is low with a ratio at 1.05x for this year. In the recent months, the earnings estimates for the next year are regularly revised upward by analysts.

Technically, the security is in a negative configuration in the short term as the bearish trend of 20-day moving average, currently at HKD 4.7, shows. Nevertheless, the stock seems in an oversold situation, near to its HKD 4.1 support area in daily and weekly data, because it was 35% down in the last trading sessions. This level might stop the bearish trend in the short term and a reversal is likely to be.

Thanks to the technical pattern and China BlueChemical’s strong fundamentals, active investors can take a long position above HKD 4.1. The downside potential is limited. The target price is HKD 5.1. However, a bearish trend would regain the upper hand if the security crosses HKD 4.1.