(Oct. 16, 2009 - Chinavestor) Chinese stocks traded mixed on Thursday but Linktone Ltd. (NASDAQ:LTON), a small cap China stock, popped up a staggering 54.6% by 12:40 P.M. Despite a solid erosion from there Linktone (LTON) finished the day 54.6% higher. Useless to say, Linktone (NASDAQ:LTON) is screaming off the most overbought China stock chart. This extreme jump prompted a SELL NOW email alert sent to Chinavestor Advanced Members.
FYI, we sent out the latest weekly stocks recommendation on Saturday to Advanced Members. Linktone Ltd. (LTON) and CNOOC Ltd. (NYSE:CEO) were among stocks we recommended to buy right at the open on Monday, Oct. 16. No wonder the average performance of our weekly stock recommendation is up 70.3% as of last week!
Besides Linktone, we advised to short CNOOC Ltd. (NYSE:CEO) as well after China's off-shore oil producer ran up over 7% in the last four days. As the following chart shows, CEO is overbought and ready to level off.
Focus Media Holdings (NASDAQ:FMCN) is another China stock that looks good from a technical point of view. FMCN is not terribly overbought just yet, is above its trading range and has strong five day momentum. All these suggest more upside for Focus Media (NASDAQ:FMCN). With rumors going around after the failed Sina acquisition, Focus Media Hold. (NASDAQ:FMCN) is set to do well as long as today's earnings don't derail the U.S. market.
WuXi Pharma (NYSE:WX) is another China play that is set to do well on Friday. It is very similar to FMCN on the overbought chart below. Wuxi (WX) doesn't have such a strong weekly performance as FMCN, but the uptick of yesterday placed WX into the elite. Should market sentiment remain strong on Friday, WuXi Pharma (NYSE:WX) may continue to do well.
Most overbought China stock list
Looking at the most oversold China plays, it is apparent that China solar stock populate the list very heavily. Almost every fourth stock on the list is solar related. CSUN, CSIQ, SOL, YGE, STP - all on the list. And while the sector is obviously weak, this creates an opportunity for the value investor. With oil at $75/barrel, solar plays have a strong incentive to do well. this might be the perfect time to build entry positions into the sector. If you want to know what stocks we like from the solar sector, become a Basic Member for less then $20/month and browse through the Growth portfolio.
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.