June 12, 2012 (Chinavestor) Huaneng Power (NYSE:HNP) took a breather on Monday after reaching extreme overbought position last week. Additional correction is possible, according to the chart below. China Transinfo (NASDAQ:CTFO) is another stock of concern on the overbought screen. Chinese airliners are looking good among momentum stocks, both CEA and ZNH are trading at the low end of their trading envelope. More upside is likely.
There are no extremely oversold stocks on the screen below. Ctrip.com Int. (NASDAQ:CTRP) is trading well below its trading range after an 8.5% dive on Monday. More downside is possible because the stock hasn't reached theoretical lows yet.
Similarly to CTRP, Xinyuan Real Estate (NYSE:XIN), 3SBio Inc. (NASDAQ:SSRX) and Acorn Int. (NYSE:ATV) are not safe either.
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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