Three out of top four Chinese momentum stocks are listed on the NASDAQ, keeping hopes high for investors. Based on the Overbought/Oversold Indicator compiled by Chinavestor, shares of NetEase (NTES), the second largest Chinese online game operator, have momentum and looks strong enough to keep the stock going. Sohu.com (SOHU), a major Chinese Internet portal, is almost as strong, followed by Baidu.com (BIDU), China's premium search engine. China Mobile (CHL), the largest mobile carrier in the world by number of subscribers, looks to be the best momentum stock among NYSE listed Chinese ADRs.
While China Life (LFC) looks to be on a retreat, outlook is great following strong economic news from China. Another potentially strong stock for Wednesday is Aluminum Corp. of China (ACH), looking neutral from a technical point of view but is a sure beneficiary of the Chinese industrial come back.
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.