(Aug. 25, 2009 - Chinavestor) Uncertainty took a toll on American indices on Monday, capping gains for China ADRs. However there are three Chinese stocks that look good from a technical point of view before the bell on Tuesday: Sohu.com (NASDAQ:SOHU), China BAK Battery (NASDAQ:CBAK), and UTStarcom Inc. (NASDAQ:UTSI).
According to the overbought/oversold indicator, China Automotive Systems (NASDAQ:CAAS) and WuXi Pharma (NYSE:WX) has the most momentum but they seem to be overbought and thus are subject to a correction. CAAS has been steadily erodig over the last two weeks and the indicator suggests there is more to the downside. WuXi Pharma (WX) pared better and has regained momentum in the last four trading sessions, but is now getting overbought.
It looks as if Sohu.com (NASDAQ:SOHU) has sustainable momentum, at least for the short run. Despite recent gains, the stock is up 3.9% for the last five days, Sohu is trading within its trading range. China BAK Battery (NASDAQ:CBAK) and UTStartcom Inc. (UTSI) has the same trading characteristics, e.g. strong momentum within the normal trading range, offering short term investors some food for thought.
Most overbought China stock list
Bargain hunters like to look into the most oversold Chinese stock universe but this time there is not much to look at. JA Solar (NASDAQ:JASO) is still on the top of the list but its technical weakness is based on poor 2009 Q2 financials. This is a bad combination offering no short term remedy to this Chinese solar maker. China Digital TV (NYSE:STV) is very similar to JASO in trading characteristics. A stock that is worth paying attention to is China Mobile (NYSE:CHL), the largest mobile carrier in the world by subscriber base. CHL reported all right earnings last week but lacks growth potential when it comes to smart phones. This is clearly reflected in its stock price. But China Mobile (NYSE:CHL) is not the only Chinese carrier lacking direction. Shares of China Unciom (NYSE:CHU) and China Telecom (NYSE:CHA) have been under-performers compared to the rest of the Chinese stock universe this year as uncertainty about the 3G roll out is still looming.
Most oversold China stock list
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.