Weak jobs report sent American indices lower on Tuesday, setting a somber tone for China stocks as well. Looking at the Overbought/Oversold indicator, only American Oriental (AOB: Quote, Profile, Research) could manage to stay ahead. The stock was able to hang on to previous gains but looks a bit overstretched now. Sinopec Corp (0386.HK: Quote, Profile , Research)(SNP: Quote, Profile, Research) (600028.SS: Quote, Profile , Research) managed to show gains for the last 5 days and looks as if solid fundamentals will get this stock back on track. Yanzhou Coal (1171.HK: Quote, Profile , Research) (YZC: Quote, Profile , Research) is another Chinese stock with strong showing. The ADR is still within its trading range, an indication that should market sentiment improve, China's third largest coal miner will participate in the rally. Baidu.com Inc. (BIDU: Quote Profile Research) is above $300 thanks to a strong rally in the last hour of trading. The stock price is far from overbought, expect BIDU to extend the rally into $320.
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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