Chinese stocks hit record in Shanghai and in Hong Kong on Monday. The Hang Seng Index <.HSI> jumped from 17,000 to 19,000 just in five trading days while the Shanghai Composite Index <.SSEC> rose 2.4% to a 13 months high. With index futures pointing to higher open for the DJIA, expect Chinese stocks to do well on Monday.
China Eastern Airlines (CEA) is the most overbought stock on the list and be aware that the stock underperformed both in HK and Shanghai on Monday. Expect weakness in New York as well. China Life has been overbought for some time and we posted several warnings last week. This Monday may be a turning point for the stock. While it is still overbought, it's not as extreme as last week. Baidu.com gave up some gains on Friday but looks to set keeping higher on Monday.
The following indicator lists China stocks with the most momentum:
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.