Feb. 26, 2010 (Chinavestor) As February nears to the end investors face a daunting question: where are we going to go from here? With no clear market direction in sigh investors are facing a difficult task - how to time stocks right. China Eastern Airlines (NYSECEA) has been advancing five days in a row - and was up again in Hong Kong on Friday. Another set of interesting stocks from the overbought monitor include New Oriental Education & Tech. (NYSE:EDU), China Digital TV Holdings (NYSE:STV) and Baidu.com (NASDAQ:BIDU) besides Giant Interactive (NYSE:GA) and Synutra Int. (NASDAQ:SYUT).
Going back to the overbought China ADR list the relative strength of Giant Interactive (NYSE:GA), the only NYSE listed Chinese online game developer and operator, comes as a surprise. It looks to me that investors bet on Giant Int. (NYSE:GA) as key players of the sector report. NetEase.com (NASDAQ:NTES) reported on Wednesday after the close, read related coverage of NetEase.com Q4 Profit Increase - More Than Facts. Shanda Interactive (NASDAQ:SNDA) and Shanda Games (NASDAQ:GAME) will report on March 1st, giving investors a good idea what's happening within the sector. Shanda Games (NASDAQ:GAME) and NetEase.com Inc. (NASDAQ:NTES) make up over 50% of total revenues and profits of the sector. Looking at the overbought monitor for GA, upside is now limited - but might get a boost should GAME report strong earnings.
China Eastern Airlines (NYSE:CEA) has been advancing five days in a row and this is clearly showing on the overbought monitor. But time has come to take profits at $40.00. Remember, NYSE listed mid-large cap stocks don't stay overbought for a long time.
The relatively small arrow of China Digital TV Holdings (NYSE:STV) and Baidu.com (NASDAQ:BIDU) suggests these stocks have been plateauing. Baidu.com (NASDAQ:BIDU) reached $500 level and is looking for a reason to go higher. The same is true for China Digital TV Holding Co., Ltd. (NYSE:STV) - the stock hit a resistance level above $7.00 and is fighting to break through it. Looking at trading characteristics for STV, it is a high risk stock, much more volatile than larger Baidu.com (NASDAQ:BIDU). With no clear market direction in sight, either stocks are risky bet at this point.
Synutra International (NASDAQ:SYUT) had a very erratic trading pattern - jumping big and then plateauing for a couple of days. Timing looks very difficult, at best, and is hard to tell where the stock is going to be 5 days from now. The stock is trading way above her trading range but large jumps in the past suggests more upside is possible. This stock is not for the faint hearted for sure...
New Oriental Education & Tech. Group Inc. (NYSE:EDU) is a stock projecting that the uptrend is here to continue. The stock has just stepped out of her trading range, has been up almost 9 days in a row - suggesting strong money flows will keep it going for some time.
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Most overbought Chinese stocks
Vimicro International Corporation (NASDAQ:VIMC) became the most oversold China stock by Friday. The chart suggests that the stock is going to level out sometime soon and might turn around. Trading pattern of VIMC looks similar to VisionChina Media Inc. (NASDAQ:VISN), a stock that bottomed out in the past two days. But the bumpy ride for VisionChina Media (NASDAQ:VISN) may be not over yet, the company is going to report earnings next week...
The sudden drop of American Dairy, Inc. (NYSE:ADY) is caught by the oversold monitor and while a technical correction after an 11% drop is possible on Friday, more downside is possible for the medium term according to the oversold chart below.
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.