China's Renren: Social Networking Back In Vogue

Renren Inc (RENN) is setting up to move sharply higher. Today it is trading at $3.45, +0.01 (0.29%). Let us get right into the hardcore nature of why this Chinese social networking stock is set to spike dramatically higher in the coming weeks.

1. Social networking is back in favor. Look at the recent performance on Facebook Inc (FB). In the last two weeks Facebook has gone from $18.87 to a high today of $26.34, a whopping 40% move. In addition, similar moves have been seen by Groupon Inc. (GRPN), which has gone from $2.60 to $4.10 (57%). Social networking is back in vogue for the time being and Renren may see some of that love.

2. Chinese stocks are getting hot. After a horrid last year on small and mid-cap Chinese ADR's, it looks like things may be turning. There is speculation that the Chinese economy is beginning to bottom and stimulus may cause solid growth to return. Just yesterday, China BAK Battery Inc. (CBAK) spiked from $1.72 to a high of $3.16 (+84%). There was no news on the stock and it has since fallen back slightly. In addition, Renren has often been noted to trade with E Commerce China Dangdang Inc. (ADR) (DANG). This stock has started its grind higher, recently moving from $3.68 to a high today of $4.66 (+27%). All these moves have left RENN forgotten in the dust. But for how long?

3. The chart is sweet as cherry pie. Note the chart below has a beautiful rounded bottom. In addition, note the stock bottomed at a perfect double bottom from December 2011. The combination of the pattern with the perfect double bottom price means Renren could be setting up for a spike higher.

Targets
I am long shares of RENN at $3.45. Should the stock start to move higher, $4.25 is the first target with the second target at the 200-day moving average on the daily chart at $4.50. When you add up the social networking stock moves, the Chinese ADR's gaining favor and the chart setup, this long play looks excellent.