Stocks ended the day on a high note with Chinese ADRs joining the rally. The following Overbought/Oversold indicator is useful to find stocks with outstanding momentum.

First, let's see some definitions here:

Overbought A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the one above. A sharp advance from $15 to $30 in 2 weeks might lead a technician to believe that a security is overbought. Or, a security is sometimes considered overbought when the stock is trading out of its trading envelope and is approaching the theoretical high. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback.

Oversold A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the one above. A sharp decline from $30 to $15 in 2 weeks might lead a technician to believe that a security is oversold. Or, a security is sometimes considered oversold when the stock is trading below its trading envelope and is approaching theoretical lows. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too fast and may be due for a reaction rally.

As the following screenshot of the Chinese ADR universe testifies, stocks that are interesting from a technical point of view are BIDU, CHU and SNP on the upside and Sohu on the downside.

Baidu.com (BIDU) is on fire since releasing 2008 Q2 earnings last week. The stock slowed down today, gaining only $2.12 or 0.61% today - just in line with Google's trading pattern today. (see chart here). Based on stock characteristic calculations, theoretical high of $394 is not too far for Baidu.

China's second largest mobile carrier, China Unicom (CHU), seems to acquire momentum lately. Based on what is public about the Chinese telecom industry restructuring, CHU will sell her CDMA business to China Telecom (CHA), China's largest fixed line carrier. CHA announced yesterday that it plans to double current subscriber base by 2010 firing up expectations for both CHA and CHU. China Telecom is among the best 10 Chinese ADRs today with a gain of $1.16 or 2.10% to close at $56.35.

Another stock that we caught on the OBOS monitor is Asia's largest refiner, Sinopec Corp. (SNP). Analysts calculated that Sinopec will receive a record, approximately RMB30 billion ($4.4 billion) government subsidy during 2008 H1 to make up for losses the company suffers from artificially low gasoline prices at the pump. Falling oil prices combined with hefty government subsidies made Sinopec one of the best stocks today. The stock is up $2.59 to $107.56.

On the negative side, Sohu.com (SOHU) is showing weakness based on the OBOS indicator. The company reported strong 2008 Q2 - partially attributed to strong advertising sales before the Olympics. The company is the official sponsor of the games and international apparel company Adidas and SONY have spent lavishly on ads. Besides healthy growth in ad revenue, Sohu's home developed online game delivered unexpectedly strong cash flows. But here is the problem: investors like to see quality earnings - earnings that are sustainable. In this case we know that Sohu's game pipeline is empty - except for this one game. Plus Sohu is up over 50% YTD and thus a technical correction is always healthy.

And finally, here is a table summing up today's winners and losers from the China stock universe.

 

TOP MOVERS - China ADR			7/30/2008 16:00
Name	Symbol	Price	Change	Change%
CNOOC LTD ADS	CEO	$150.74	$6.40	4.43%
CTRIP.COM INTL LT	CTRP	$46.54	$3.13	7.21%
CHINA PETRO & CHE	SNP	$107.56	$2.59	2.47%
PETROCHINA CO ADS	PTR	$135.75	$2.48	1.86%
BAIDU.COM	BIDU	$350.24	$2.12	0.61%
HSBC HLDGS PLC AD	HBC	$84.02	$1.70	2.07%
CHINA MOBILE LIMI	CHL	$69.42	$1.66	2.45%
FOCUS MEDIA HOLDI	FMCN	$29.81	$1.58	5.60%
CHINA NETCOM GRP	CN	$61.70	$1.27	2.10%
CHINA TELECOM CP	CHA	$56.35	$1.16	2.10%
E-HOUSE HOLDINGS	EJ	$9.74	-$0.10	-1.02%
QIAO XING UNIV TE	XING	$4.96	-$0.12	-2.36%
51JOB	JOBS	$14.45	-$0.12	-0.82%
SOLARFUN POWER	SOLF	$13.47	-$0.18	-1.32%
SINOPEC SHANGHAI	SHI	$33.96	-$0.20	-0.59%
THE9 LIMITED	NCTY	$22.30	-$0.23	-1.02%
CHINA SOUTH AIR L	ZNH	$22.49	-$0.35	-1.53%
HOME INNS & HOTEL	HMIN	$15.37	-$0.63	-3.94%
ASIAINFO HLDGS IN	ASIA	$13.48	-$0.75	-5.27%
GIANT INTERACTIV	GA	$9.00	-$1.04	-10.36%