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TUDO, YOKU in danger

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denial_1 January 31, 2012 (Chinavestor) Tudou Hold. (NYSE:TUDO) and Youku.com Inc. (NYSE:YOKU) continue to tower the overbought China stock list below. But these stocks will have to test their resilience today again for their technical situation is extreme. Sohu.com Inc. (NASDAQ:SOHU) and NetEase.com Inc. (NASDAQ:NTES) fell hard yesterday after reaching an extreme overbought position. But more upside looks possible for Renren Inc. (NYSE:RENN) despite a 50% surge in the past few days. China Unicom (NYSE:CHU) and Shanda Games (NASDAQ:GAME) are the two most important stocks on the oversold screen today. Scroll down to see chart.

Tudou Hold. (NYSE:TUDO) and Youku.com Inc. (NYSE:YOKU) has reached theoretical highs and ready to take a breather. Silvercorp Metals (NYSE:SVM) is still in a tight spot while Aluminum Crop. of China (NYSE:ACH) pulled back on Monday. More upside is possible for China's resource stocks should market sentiment remain strong.

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Upside potential exceeds downside risk for China Unicom (NYSE:CHU) at current prices. But more downside is possible for Shanda Games (NASDAQ:GAME) despite the recent sell off.

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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.

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