April 19, 2012 (Chinavestor) The $100 question for today is this: where is the ceiling for Feihe International (NYSEADY)? The stock had a spectacular run YTD and price's been just accelerating. The stock is off from theoretical highs, which is a good sign. But the pace of the advance is a red flag.
Melco Crown Entertainment (NASDAQ:MPEL) is a sound trading stock but is danger when market sentiment turns negative.
Stocks with sound fundamentals and good trading characteristics on the indicator below include Baidu.com (NASDAQ:BIDU), Home Inns & Hotels Management (NASDAQ:HMIN), NetEase.com Inc (NASDAQ:NTES), China Mobile (NYSE:CHL), and Youku (NYSE:YOKU). Note, none of these stocks are overbought technically speaking.
Spreadtrum Communications (NASDAQ:SPRD) fell over 20% this week with heavy volume. The stock is not oversold because it hasn't reached theoretical lows yet. More downside is possible!
Stocks that are bottoming out include Sina Corp. (NASDAQ:SINA) and China Eastern Airlines (NYSE:CEA).
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.