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China stock ready for correction, Feb. 7

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decline3 February 7, 2012 (Chinavestor) There are a large number of overbought China stocks as the following chart testifies. They range from Jinko Solar (NYSE:JKS) through Tudou Hold. (NASDAQ:TUDO) to Perfect World (NASDAQ:PWRD). 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.

OB_20120207

China Unicom (NYSE:CHU) is not oversold despite recent losses. Ctrip.com Inc. (NASDAQ:CTRRP) and Sohu.com Inc. (NASDAQ:SOHU) has more downside risk left, according to the oversold chart.

OS_20120207

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.

aa_OBOS_expl_2weeks


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