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Watch out for Momentum China Stocks on Monday!

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watch_outDec. 7, 2009 (Chinavestor) This is going to be an interesting week when the dollar is expected to rise pushing stocks and most notably commodity plays lower. Momentum China stocks are expected to suffer to a certain degree but oversold China plays are certainly subject to correction. Overbought is a technical condition that occurs when prices are considered too high and susceptible to a decline. Stocks of interest for today include Solarfun Power (NASDAQ:SOLF), JA Solar (NASDAQ:JASO), Focus Media Holdings (NASDAQ:FMCN), Cogo Group (NASDAQ:COGO), LDK Solar (NYSE:LDK), China Life Insurance (NYSE:LFC) from the overbought and Huaneng Power (NYSE:HNP) from the oversold list.

 

As the following overbought China stock monitor testifies, Solarfun Power Holdings (NASDAQ:SOLF) is the most overbought China play today  because the stock is trading out of its trading envelope and is approaching the theoretical high.

A sharp advance from $3.7 to $4.4 in a week might lead a technician to believe that a security is overbought, as is the case for JA Solar (NASDAQ:JASO). 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.

China Automotive Systems (NASDAQ:CAAS) is also overbought and given that the stock is trading at an all time high, CAAS is certainly ready for a correction.

LDK Solar (NYSE:LDK) has been very strong lately but is not overbought yet. Heavy underlying volume last Friday suggests LDK is going to be relatively resilient to market weakness.

Focus Media (NASDAQ:FMCN) and Cogo Group (NASDAQ:COGO) has acquired substantial momentum last week but are not considered overbought at this time. Focus Media (NASDAQ:FMCN) has just moved above her trading range while Cogo Group (NASDAQ:COGO) is still trading within her trading envelope.

China Life Insurance (NYSE:LFC) ended last week on a high note and is expected to do well in the next few days as investment returns are rising along the strong performance of the Shanghai Composite. Remember that LFC derives approx. 15% of its profits from securities ties to the performance of the Shanghai Composite, an index that's been very strong lately. Despite a strong showing last week, China Life Insurance (NYSE:LFC) is not overbought.

Most overbought China stock list

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Looking at the most oversold China stock list below, Huaneng Power (NYSE:HNP) is certainly a stock of interest. Large cap NYSE stocks, such as HNP, are rarely oversold and when they are, they typically bounce back after some time. If history can be used to predict future performance, expect HNP to turn around in about a week.

Most oversold China stock list

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