(Sept. 8, 2009 - Chinavestor) NASDAQ listed small cap Chinese stocks has been on fire last week, according to the overbought/oversold indicator. UTI Starcom (NASDAQ:UTSI) is the most overbought China stock on the radar screen, suggesting the time for a correction has arrived. Shares of this small cap China play traded sideways on Friday following an over 20% jump a day before. But again, don't expect the rally to continue, the stock is clearly overbought. There are two more Chinese stocks that are similar to UTSI from a technical point of view. China TechFaith Wireless (NASDAQ:CNTF) and Focus Media Holdings (NASDAQ:FMCN) have advanced too much too fast, making a case for a bearish sentiment from here on.But Ctrip.com (NASDAQ:CTRP), the leading Chinese online travel agency, looks to have just enough momentum to keep it going at least for Tuesday. AsiaInfo Holdings (NASDAQ:ASIA) is similar to Ctrip.com, both are set to advanced on Tuesday.
Most overbought China stock list
Looking at the other end of the spectrum, it is hard to find oversold Chinese stocks. JA Solar (NASDAQ:JASO) and Linktone (NASDAQ:LTON) are sold off but have been sluggish for a long time, indicating that the weak performance is not a loss of momentum but weakness for a longer term.
Most oversold China stock list
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.