Looking at the China stock landscape from an Overbought perspective, China Life (LFC) tops the list as the most overbought ADR, followed closely by NetEase.com Inc. (NTES). But China Life (601628.SS) (LFC) (2628.HK) took a breath last week and thus current rally may be sustainable. NetEase is on the rise and looks to have strong momentum.
It seems to me that China stocks that are in harms way are those that are trading the further away from their normal trading range. These stocks include China Telecom (CHA) (0728.HK), China Eastern Airlines (600115.SS)(0670.HK)(CEA), and E-house (EJ).
Shanghai Petrochemical (0338.HK)(SHI) (600688.SS) is similar to the previous set of stocks but Chinese oil companies, including SHI, just rallied very strongly in the Shanghai stock exchange. Sinopec (SNP), the mother company of Sinopec Shanghai Petrochemical, rose 10.03% - it's daily limit - in Shanghai on Wednesday following estimates that earnings for 2009 first six months will more than triple. Sinopec rose 3.76% in Hong Kong on Wednesday. SHI A-shares advanced 4.96% in Shanghai while its Hong Kong listed H-shares advanced 7.67% in Hong Kong. Again, both SNP and SHI had a very strong showing in both Chinese stock markets and expect them to extend that rally in New York on Wednesday.
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.