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U.S. listed Chinese stocks bounce off oversold position

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WallStreet Feb. 3, 2010 (Chinavestor) Two outstanding market days helped Chinese stocks moving away from the oversold position but was not enough to get them overbought. Some of the most interesting stocks for Wednesday include: China Mobile (NYSE:CHL), China Southern Airlines (NYSE:ZNH), Melco Crown Entertainment Ltd (NASDAQ:MPEL), China Integrated Energy (NASDAQ:CBEH) and WuXi Pharma (NASDAQ:WX) from the overbought monitor. Stocks not to touch today are 3SBio Inc. (NASDAQ:SSRX), Qiao Xing Universal Telephone (XING). Xinhua Sports Entertainment Ltd (NASDAQ:XSEL) and Gushan Environmental Energy Limited (NYSE:GU) are stock of interest though, a technical bounce back is in the cards.

Ctrip.com (NASDAQ:CTRP) reported last night and fell during after market trading - but numbers are not as bad in our reading as market reaction was. Acorn International (NYSE:ATV) boosts the most momentum on the overbought chart below, however the stock hit a resistance level at $6.20 and is unlikely to break it though. China Mobile (NYSE:CHL), China Southern Airlines (NYSE:ZNH), CNOOC Ltd. (NYSE:CEO) and Yanzhou Coal (NYSE:YZC) are heavy stocks with sustainable momentum, unless market sentiment renders technical analysis useless. CNOOC Ltd. (HKG:0883) advanced 9.5% in Hong Kong followed closely by Yanzhou Coal (HKG:1171).

Melco Crown Entertainment Ltd (NASDAQ:MPEL) and China Integrated Energy (NASDAQ:CBEH) have strong momentum and are not overbought despite recent gains. There is more left to the upside but again, small cap stocks can't fight the market. So investors have to exercise caution today. WuXi Pharma (NYSE:WX) is a tricky stock. WX was on the top of the overbought chart along with China Automotive Systems (NASDAQ:CAAS) for the longest time last November but fell out of favor as the stock market correction hit in. CAAS and WX are back in play again - but this time there is a reminder that Wall Street is a two way street: stocks that go up can come down just as fast...

Most overbought Chinese stocks

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Gushan Environmental Energy Limited (NYSE:GU) is screaming off the oversold chart. The company fell -9.3% on Tuesday but it might have been an over reaction and a bounce back is a possibility. Trading experience tells me that when a stock falls approx. -10% a day, a short term technical correction might follow. Xinhua Sports Entertainment Ltd (NASDAQ:XSEL) is another stock with a potential correction one of these days. The stock lost over -50% in the last three months and though it is not trading at her theoretical lows yet, there has to be a bottom at some point.

Most oversold Chinese 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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