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Volatility is back for Chinese stocks as earnings resume

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money8 Feb. 23, 2010 (Chinavestor) U.S. market volatility combined with earnings season made trading risky with Chinese stocks on Monday. Most of the action took place on the oversold end of the China stock universe with a number of solar plays trading at a discount. Yingli Green Energy (NYSE:YGE) is trading close to her theoretical lows and the appearance of Canadian Solar (NASDAQ:CSIQ) and JA Solar (NASDAQ:JASO) among the most oversold China stocks is a signal that solar plays are under pressure before earnings come out next week. Sharp drop sent shares of Tongjitang Chinese Medicines Co. (NYSE:TCM), VisionChina Media (NASDAQ:VISN), AirMedia Group (NASDAQ:AMCN), China Sky One Medical (NASDAQ:CSKI)  below their trading range but more downside is likely, according to the oversold monitor.

Shares of Baidu.com (NASDAQ:BIDU) and Acorn International (NYSE:ATV) look good from the overbought stock list but Synutra Int. (NASDAQ:SYUT) have hit a wall suggesting a resistance level at $15 is there to stay. Shares of China Agritech Inc. (NASDAQ:CAGC) advanced +5.4% to $24.00 on Monday making it to an almost 40% run in the last five days. But investors have to exercise caution here given a relatively low visibility into the stock. The company just made it to the NASDAQ last September from OTC:BB - thus no reliable revenue and earnings history is available. I'm not saying the stock is doomed because more upside is within the cards - but I have no idea where the stock is going to trade a week from today.

Most overbought Chinese stocks

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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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