(Sept. 16, 2009 - Chinavestor) It is easy to find Chinese momentum stocks these days, but the question is this: which are the ones that will keep going higher?
According to the overbought / oversold indicator, Sohu.com (NASDAQ:SOHU) is in the danger zone just as is Baidu.com (NASDAQ:BIDU) and three more NASDAQ listed China stocks: KongZhong Corp. (NASDAQ:KONG), Focus Media (NASDAQ:FMCN), and China Tech Faith (NASDAQ:CNTF).
While Focus Media (FMCN) looks exhausted there is a lot of ammo behind Baidu.com and Sohu.com. CNTF and KONG have short term momentum, I can see them doping well today - but not much beyond that. So be careful because these stock have moved too much, too fast.
Most overbought China stock list
The other end of the China stock universe offers one stock that is way oversold and might pop any day - Linktone (NASDAQ:LTON). Stocks that fell hard but are still far from oversold include China Telecom (NYSE:CHA), NetEase (NTES) and Hurray Holdings (NASDAQ:HRAY). These stocks have more downside risk.
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.