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China ADRs are getting oversold

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OBOS-623-tumbThere is a universal pull back of Chinese ADRs according to the Overbought/Oversold indicator compiled by Chinavestor. While it reflects a significant drop in value from a week ago, it also indicates certain stocks are ready to make a comeback. And with index futures pointing to a higher open on Tuesday, expect some China stocks to make some significant gains.

Commodity plays are susceptible to wide fluctuations but as CNOOC Ltd. (0883.HK: Quote, Profile , Research) (CEO: Quote, Profile , Research) approaches the lower end of its trading envelope CEO is presenting a buying opportunity. SINA Corporation (SINA: Quote, Profile, Research) has been hit hard following weak 2009 Q1 results, but as we pointed out the worst may still lay ahead. (Sina falls after Q1 but remains overvalued).

Stocks that showed strength despite hospitable market environments include Baidu.com Inc. (BIDU: Quote Profile Research), Sinopec Corp (0386.HK: Quote, Profile , Research)(SNP: Quote, Profile, Research) (600028.SS: Quote, Profile , Research), HSBC Holdings Plc (HBC: Quote, Profile , Research)(0005.HK: Quote, Profile , Research), a Hang Seng Index heavy weight, and Huaneng Power International (0902.HK: Quote, Profile , Research) (600011.SS: Quote, Profile , Research) (HNP: Quote, Profile , Research). Expect these stocks to do well if market sentiment in the U.S. improves.

 

OBOS-623

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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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