(Sept. 24, 2009 - Chinavestor) Looking at the overbought indicator this morning, the two stocks on the top stick out. AsiaInfo Holdings (NASDAQ:ASIA) not only jumped big on Wednesday but stepped out of its trading range and became overbought. China BAK Battery (NASDAQ:CBAK) is in a very similar technical condition, advancing 29% yesterday, moving way out of her normal trading range. All said, both stocks are overbought and ready for a correction.
Focus Media Holdings (NASDAQ:FMCN) moved considerably less then CBAK or ASIA, but is overbought and thus remain cautious. China TechFaith Wireless (NASDAQ:CNTF) has plateaued on Wednesday and might not have much upside left. NetEase.com (NASDAQ:NTES) is similar to Shanda Interactive (NADAQ:SNDA) - both are riding on excitement circumventing the sector. Shanda will IPO her gaming unit, raising interest for the online game sector where NTES is the most profitable company.
Most overbought China stock list
Looking at the most oversold China stock universe, China Telecom (NYSE:CHA) is the only truly oversold China ADR at the moment. given that China Telecom is a real company with strong operations, cash flow and growth potential, CHA will certainly come back. The only question is when and how much, but regardless, it is a buying opportunity for value investors.
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.