(Sept. 28, 2009 - Chinavestor) Trading in Asia on Monday suggests a bleak trading day for Chinese stocks for today, but American market sentiment can overwrite such negative omen. U.S. investors are embracing a week full of economic data, among them the Labor Department's monthly reading on unemployment. Besides unemployment data, we're going to see reports of home prices, manufacturing activity, factory orders, and consumer spending. And if this wasn't enough, we're about to see third quarter reports starting in October.
When it comes to individual stocks, the overbought/oversold indicator has proven to be a successful tool in finding trading opportunities. Looking at the most overbought stock today, Focus Media Holdings (NASDAQ:FMCN) tops the list after a 16.9% run last week. It is the second attempt for Focus Media Holdings (FMCN) to stay above the $11 resistance level. It's difficult to tell if this time Focus media (NADAQ:FMCN) will firmly establish her stock price above the $11 range due to uncertain market sentiment. As indicated, Chinese indices traded lower on Monday but index futures point to a higher open for the S&P 500 and the NASDAQ. So it all comes down to market sentiment - should that remain strong on Monday, FMCN has a good chance to extend her rally.
China BAK Battery (NASDQ:CBAK) advanced over 35% in the last two days, raising questions how far the stock price can go. CBAK is almost as overbought as FMCN but if U.S. market sentiment remains strong, China BAK Battery might extend her rally on Monday.
While Cogo Group (NASDQ:COGO) jumped substantially last week, the rally came to an end last Thursday, leaving not much upside for COGO on Monday.
Rino International (NASDAQ:RINO) plateaued on Thursday and Friday while the market fell, suggesting RINO has strong resilience to negative market sentiment at current prices. This means if market sentiment improves, RINO has more upside left.
For additional momentum stocks, please take a look at the following list.
Most overbought China stock list
Looking at the most oversold China stock list, China Telecom (NYSE:CHA) is still the most intriguing value play. The stock is trading below her trading range and is oversold. Bargain hunters should not miss out on this opportunity.
The Chinese solar sector fell hard as is evidenced by weakness in the stock price of China Sunergy Co. (NASDAQ:CSUN) and ReneSola ltd. (NYSE:SOL). And while these two Chinese solar plays are on the top of the list, YGE, CSIQ and JASO are also on the most oversold list, testifying that a fundamental weakness is hunting the whole sector. This in turn suggests that a turnaround for the sector is not imminent, so don't touch Chinese solar stocks just yet. so despite China Sunergy (NASDAQ:CSUN) is on top of the list, it will take some time before the sun will shine again on the company.
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.