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Investors in Chinese microcaps and smallcaps have had a hell of a month. Tiny stocks like Tianli Agriculture (Nasdaq:OINK), Kingtone WirelessInfo Solutions (Nasdaq:KONE), Longwei Petroleum (Amex:LPH), and China MediaExpress (Nasdaq:CCME) gained 50% or more in the past few weeks alone. A week ago small Chinese stocks made up the bulk of my portfolio, and I'm thankful. Moves like those can make up for a lot of bad trades.

But these stocks no longer offer the same risk / reward today. In the beginning of the month, most showed perfect breakouts from mature basing patterns. Now, they are extended and overbought by any measure. Nobody knows if a pullback is imminent, but the setup is not as favorable as before. I'm happy to book the outsized gains these trades have offered, and enter this week with only a small fraction of the Chinese stocks I held this time last week.

Tianli Agriculture – OINK

Tianli Agriculture (<a href='http://seekingalpha.com/symbol/oink' title='Tianli Agritech, Inc.'>OINK</a>) chart

Up 50% in two weeks.

Kingtone WirelessInfo Solutions – KONE

Kingtone WirelessInfo (<a href='http://seekingalpha.com/symbol/kone' title='Kingtone Wirelessinfo Solution Holding Ltd'>KONE</a>) chart

Another 50%+ riser in October alone.

Longwei Petroleum - LPH

Longwei Petroleum (LPH) chart

Up well over 50% before pulling back slightly.

China MediaExpress – CCME

China MediaExpress (<a href='http://seekingalpha.com/symbol/ccme' title='China MediaExpress Holdings, Inc.'>OTCPK:CCME</a>) chart

Doubled in less than 2 months, and looks like it may go parabolic.

DISCLOSURE: No position in OINK, LPH, CCME, KONE. Small position in a few other Chinese smallcaps.

Source: Taking Profits in Chinese Micro Caps and Small Caps