Xinyuan Real Estate Technical Update 2.27

Today Xinyuan Real Estate (NYSE:XIN) went down to test if the gap could be closed and there was enough buying support to prevent closure.  It looks like a breakaway gap is still very much in the cards.  Here is the daily chart with annotations.

As can be seen on the chart, XIN appears to have very bullish trend line support that it bounced off last week on the day before its Q4 earnings report was released.  And MACD may be crossing up again, as it did at the beginning of the year.

This trendline, it should be noted, would give XIN a price target of $7 by September of this year.  However, this trendline is still in early stages of formation, and depiste several tests in early January in the high $1's, it has only one retest since then.  So it is something to watch at this point, but shouldn't be taken as any more than a possible early stage pattern. 

However, with book value well over $8/share, quarterly dividend coming, and positive earnings for the foreseeable future, $7 by September doesn't seem unreasonable .  This would entail a p/e ratio of 5 with 2012 earnings estimated at $1.40 per ADS.  A p/e ratio of 5 would still be less than XIN's industry equivalents trading in China, and is the p/e ratio that XIN's US-listed competitor, China Housing & Land Development (NASDAQ:CHLN), a reverse merger with a weaker balance sheet, already commands. So it's definitely within the realm of possibility. 

Disclosure: Long $XIN