NetEase Defies Bearish Signals in Rally That Still Looks Strong

  • Rises 70% as 12 downward indicators fail to halt upward trend
  • Stock is three standard deviations above its five-year average

NetEase Inc.’s U.S.-traded shares, up 70 percent since August in one of the Beijing-based online gaming operator’s strongest-ever rallies, have defied repeated bearish signals and show no signs of stopping.

Since its four-month low on Aug. 24, the stock has displayed a dozen candlestick patterns that can presage a downward reversal, including one yesterday and two last week. In that period, it has sent only four bullish signals.

The price, even though it fell 1.1 percent yesterday in a down day for U.S.-traded Chinese stocks, is three standard deviations above its five-year average. Its relative strength index has been just above or below overbought territory for two months.

Yet the stock remains comfortably within an upward channel it has occupied since late August as it quickly followed a bearish death cross -- 50-day moving average dropping below the 200-day -- in October with a bullish golden cross in November.

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