China Gengsheng Minerals Leaves No Doubt (CHGS)

If you're reading this, then odds are you already know that China Gengsheng Minerals Inc. (NYSEMKT:CHGS) shares are up a whopping 60% today. And, odds are good you're struggling to find a reason why CHGS are running so hard. Here's some advice - discontinue the hunt. You're not going to find a reason for all this bullishness in the headlines. Yet, there's a reason. It's just a bigger, almost too big to spot kind of reason. Either way, would-be traders can take the hint at face value.

CHGS is, as the name implies, in the mineral business. That's not a description that does the Chinese company and supplier to the Chinese market justice, however. China Gengsheng Minerals makes specialized industrial materials. Though business was tough in 2012 and even tougher in 2013, there's something of a light at the end of the tunnel now. That light's been evident since October, when shares cleared a key technical hurdle. In the meantime the stock's put some distance between itself and that technical hurdle. In fact, the technical strength has been so good, that the momentum has become trade-worthy.

The chart of China Gengsheng Minerals below illustrates just how big - and precise - the reversal has been thus far, and points to how much room there is for the stock to keep rising. In June of last year, CHGS began a V-shaped pivot, and proved that pivot was, well, a pivot, in October by punching through a former, falling resistance line. It was about that time the stock hurdled the key 200-day moving average line (green) as well.

Even then, however, there was some lingering doubt, with the stock pulling back from the October surge. As it turns out, it was only the calm before the storm. Using those key long-term moving average lines as a pushoff point allowed CHGS to spark the current rally to higher highs. Better still, the volume behind this second wave of bullishness has been notably higher than any of the volume seen during the weak periods, or even the sideways periods. It's a clue that this uptrend is gathering participants, which is often a missing ingredient with failed rallies.

Bottom line: While we may get something of a bearish pushback after such a red-hot runup today, China Gengsheng Minerals are in a new uptrend, as the bulls have tipped their hand. The reason for the buying interest will be revealed eventually. For now, the key is simply to find a good entry spot into the uptrend.

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