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China ADR list Overbought/Oversold snapshot

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Stocks were trading sideways on Wednesday yet there is a dramatic change for China stocks compared to last week. As the following Overbought/Oversold indicator compiled by Chinavestor indicates Sinopec (SNP), the largest refinery in Asia by volume, is  approaching theoretical lows and is thus oversold. Expect Sinopec to come back within two days.

The following ADRs fell the hardest and thus are more likely to rebounce once market sentiment improves:

 

Taking funadamentals in consideration:
  • CNOOC Ltd is dependent on crude price and fluctuates accordingly
  • China Telecom has a solid data business segment and has strong 3G growth outlook
  • China Mobile is good, solid cash, 3G outlook is problematic on longer term
  • Huaneng Power is good when price of coal is low. Price of electricity is fixed and this is sensitive to coal price fluctuations. But with Chinese power generators outperforming in Hong Kong on Thursday, Huaneng is a possible winner for the day. The rally in HK is attributed to expectations that price of electricity will increase while price of coal is still far below 2008 levels. It's a major fundamental outlook change.
  • China Life reported weak May premium income growth, will have problems for the upcoming quarter. Be careful with this stock for short term.
  • Yanzhou Coal is sensitive to coal price fluctuations. While China Shenhua Energy (1088.HK: Quote, Profile , Research)(601088.SS: Quote, Profile , Research) and China Coal Energy Co. Ltd. (1898.HK: Quote, Profile , Research) are increasing production rapidly Yanzhou lags behind. On the other hand Yanzhou mines the best quality coal and thus achieves price premium over competitors.

 

 

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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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