Feb. 1, 2010 (Chinavestor) Market days favor stocks with significant prior momentum and oversold stocks. That said, the oversold end of the Chinese stock universe is so overcrowded that it's hard to hand pick stocks for Monday. Giving it an attempt, despite no clear cut situation, Focus Media Holdings (NASDAQ:FMCN), ATA Inc. (NASDAQ:ATAI), Ctrip.com (NASDAQ:CTRP) and New Oriental Education (NYSE:EDU) are stocks of interest. The overbought end is relatively uneventful at this moment except for Acorn International (NYSE:ATV), China Integrated Energy (NASDAQ:CBEH) and Changyou.com (NASDAQ:CYOU).
Let's start with the overbought end - pointing out that there is no technically overbought China stocks at the moment. But there are some stocks with significant uptick such as Acorn Int. (NYSE:ATV). The stocks jumped over 10% on Friday with significant volume but it's early to tell if this uptick is a one time shot or the beginning of a sustainable rally. China Integrated Energy (NASDAQ:CBEH) is a different story tough. The stock got a boost after announcing a $52 million boost to her top line last Thursday. Shares of the company jumped on the news and extended the rally to Friday yet the stock is not overbought yet. Changyou.com (NASDAQ:CYOU) had a strong Friday last week but weak earnings of her mother company on Monday morning, Sohu.com (NASDAQ:SOHU), will keep CYOU under water for the trading session today.
Most overbought Chinese stocks
The oversold end of the China stock universe is packed. Focus Media Holdings (NASDAQ:FMCN) and ATA Inc. (NASDAQ:ATAI) have suffered significant losses last week and it's unclear at this point where the bottom might just be. Ctrip.com (NASDAQ:CTRP) is a quality company and looks way oversold. New Oriental Education (NYSE:EDU) has been approaching theoretical lows plus has a significant loss of momentum, a mix that signals the bottom is near.
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.