Chinese ADRs ended the last week of May on a high tone and many pointed out that China frenzy is overdone. But our Overbought/Oversold indicator signals there is additional upside potential to China stocks. Based on the following indicator, the list of China ADRs on fire include:
- American Oriental (AOB) is not rading above its trading range
- Baidu.com (BIDU) is well above its trading range and is nearing to a new theoretical high of $300
- China Mobile (CHL) had the bst week among Chinese telecommucication companies.
- China Telecom (CHA) was playing catch up last week but is still behind CHL's monthly return
- China Life Insurance (LFC) jumped big and is not at the high end of its trading range
- Sohu.com (SOHU) did good on fundamentals but is getting dangerously overbought
- China Eastern Airline (CEA) was absolutely on fire last week but is due to a correction based on technicals.
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.