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BIDU and the rest of the overbought China stock universe

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internet_2 Jan. 14, 2010 (Chinavestor) Baidu.com (NASDAQ:BIDU) stole the overbought story for Thursday following a $52.99 or +13.71% advance on Wednesday following news the Google might exit China, leaving Baidu in control of the most populous internet market of the world. BIDU was the most oversold China ADR as of yesterday morning- the stock fell well below the $400 resistance level on Tuesday - but bounced up to the overbought monitor today. As the following chart suggests, BIDU is far from her theoretical highs, leaving more room to the upside.

Another stock of interest on the overbought monitor is China Mobile (NYSE:CHL). The largest Chinese mobile carrier rose six days in a row on the NYSE and continued to climb higher in Hong Kong on Thursday, suggesting the party is not over yet. Investors have started to snap up CHL shares before 3G numbers are released later this month.

Global Sources (NASDAQ:GSOL) has been very volatile in the last four days and is hard to tell where the stock is going to go from here. Another wild card is The9 Ltd. (NASDAQ:NCTY), an online game developer and operator. The company ceased her licence to operate one of the most popular online game in China, The World of Warcraft (WoW) last year. But with the launch of the World of Fighter (WoF), a possible replacement for the popular game, the company might bounce back up.

Most overbought Chinese stocks

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Most of the action is taking place on the overbought end of the China stock universe. China Life Insurance (NYSE:LFC) is an oversold value play - but it's going to be hard to time her resurgence. Still, it's an opportunity for medium term value investors.

Most oversold China stocks

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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.



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