Shares of China Eastern Air (CEA) rose $1.10 or 4.1% on Friday to $28.57, recording an accumulated gain of 26.98% in the last five trading days. The company got boost from a merger with Shanghai Airlines, fuel hedge gains of Yuan 2.74 billion ($401.1 million) and rival Air China's strong profit outlook.
We issued a warning on Thursday based on the Overbought report below, citing that China Eastern Airlines (600115.SS)(0670.HK)(CEA) is the most overbought Chinese stock and is ready to take a break. The break did not come on Friday but it came on Monday in Hong Kong and Shanghai simultaneously as its H- and A-shares succumbed to profit taking despite strong market days. So expect CEA to be an underdog on Monday.
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.