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Earnings, market sentiment drives China stocks

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think_1 Feb. 4, 2010 (Chinavestor) Looking at the overbought chart this morning, a $23.60 jump of Baidu.com (NASDAQ:BIDU)  yesterday propelled the stock to the top of the chart. But despite a sizable advance, Baidu.com (NASDAQ:BIDU) is not overbought yet. All it needs is a good market day to keep going higher. But when it comes to the market, you never know.. Take a look at CNOOC Ltd. (NYSE:CEO) on the second part of the chart. The company issued an extremely bullish oil & gas production growth target for 2010 on Tuesday but the big jump came just a day later on Wednesday. It looks as if it took the markets a whole day to digest the news. Nevertheless Chinavestor Advanced members got a benefit of CEO's strong performance: CNOOC Ltd. (NYSE:CEO) is on the Weekly Stock Buy List as of last Friday.

Guangshen Rail (NYSE:GSH) has been a very boring stock, the fact that it's among the best three on the overbought chart speaks volumes about the outlook for this stock. The bullish sentiment is evident in Hong Kong as well; while the Hang Seng Index fell -380.44 points today, H-shares of Guangshen Rail (HKG:0525) advanced +0.6%.

Weak earnings hurt Origin Agritech (NASDAQ:SEED) and Ctrip.com (NASDAQ:CTRP) on Tuesday. While we remain cautious about SEED, results of Ctrip.com (NASDAQ:CTRP) were better than the reaction of the market suggests. Read: Ctrip ' 09 Q4 disappoints - How bad is it? Actions Semiconductor (NASDAQ:ACTS) reported after the close yesterday slipping to a loss - and sending her shares down 4.8% in after market trade. Don't expect much improvement from the stock today.

The rest of the overbought China stock universe is far from overbought; momentum will depend on market sentiment.

Most overbought China stock list

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Gushan Env. Energy (NYSE:GU) continues to draw attention of the oversold chart, but the turnaround might have to wait. Longtop Financial Technologies (NYSE:LFT) are trading near theoretical lows but don't expect much improvement in the near term because the stock is trading just below her trading envelope.

Most oversold Chinese stock list

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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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