Jan. 29, 2010 (Chinavestor) We have been pointing out in previous pre-market and overbought/oversold reports for two days that U.S. and Chinese equity markets became way oversold and were ready for an upside correction. Given that the downturn was universal, expect a wide range of Chinese ADRs do well on Friday. As far as the most oversold Chinese stock universe is concerned, expect Home Inns & Management (NASDAQ:HMIN), Sina Corp. (NASDAQ:SINA) and AsiaInfo Holdings (NASDAQ:ASIA) do extraordinary on Friday.
Only two stocks have shown short-term momentum until Thursday - Acorn International (NYSE:ATV) and China Integrated Energy (NASDAQ:CBEH). This latter just announced a significant contract that will add an additional $52 million in revenue for 2010.
Most overbought Chinese stocks
The oversold end is way too crowded to tell exactly what stock is gong to do best on Friday. But stocks with sound fundamentals are expected to get off the list soon, such as Home Inns & Management (NASDAQ:HMIN). It is imperative that this stock is the most oversold China ADR at the moment. Another stock of interest is Sina Corporation (NASDAQ:SINA), an internet blue chip that is very near to bottom, according to the oversold indicator. AsiaInfo Holdings (NASDAQ:ASIA) is oversold but is a very sound company and deserves better, as well.
Most oversold Chinese stocks
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.