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Earnings can make it or break it: overbought and oversold China stock list

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cash_1 March 8, 2010 (Chinavestor) China Telecom (NYSE:CHA) is leading the overbought monitor this morning but it's Harbin Electric (NASDAQ:HRBN), Synutra International (NASDAQ:SYUT), and CNinsure Inc. (NASDAQ:CISG) that are in the danger zone. Giant Interactive (NYSE:GA) and Melco Crown Entertainment (NASDAQ:MPEL) are on the edge while China Fire & Security (NASDAQ:CFSG), HQ Sustainable Maritime (AMEX:HQS), and Gushan Environmental Energy (NYSE:GU) are looking good from a technical point of view. VisionChina Media (NASDAQ:VISN), Spreadtrum International (NASDAQ:SPRD), China Medical Technologies (NASDAQ:CMED) and Sutor Technologies Group (NASDAQ:SUTR) are stocks of interest from the oversold report.

China Telecom (NYSE:CHA) is approaching theoretical highs yet more upside is possible. Hong Kong listed H-shares of the company (HKG:0728) advanced 1.99% on Monday, the most among China Mobile (HKG:0941) and China Unicom (HKG:0762). But don't expect a large cap NYSE listed China play to stay quasi overbought for a long time. A few good days may lay ahead but don't forget to take some profits.

Shares of Harbin Electric (NASDAQ:HRBN) are trading way above her normal trading range and are approaching theoretical highs. Take some profits before the pullback - says the overbought monitor below. Synutra International (NASDAQ:SYUT) and CNinsure Inc. (NASDAQ:CISG) are in a very similar situation - upside is getting limited while risk grows. Take profits now.

Giant Interactive (NASDAQ:GA) reported flat revenues and earnings last week. Related coverage: China online game landscape as earnings roll in. Further price movement is going to depend on the rest of the sector. Shanda Games (NASDAQ:GAME) became oversold after a -10% plus tumble following earnings release and might make a comeback. As investors regain confidence with the sector, Giant Interactive (NYSE:GA) may have more upside left.

Shares of China Fire & Security Group (NASDAQ:CFSG) jumped 7.12% last Friday with heavy underlying volume. The surge in volume is a good sign that the rally isn't exhausted yet. Another positive sign is that the overbought monitor suggests the stock is just trading above her trading range, leaving more room to the upside.

HQ Sustainable Maritime (AMEX:HQS) and Gushan Environmental Energy (NYSE:GU) look similar to CFSG from a technical point of view. Both companies are trading just above their trading envelope suggesting more upside is very possible.

Melco Crown Entertainment (NASDAQ:MPEL) has been trading in a narrow range last week suggesting the stock is looking for a direction. Shares of MPEL are not overbought but is looking for a catalyst for additional upside.

Most overbought China stocks

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According to the definition, a sharp decline in the share price in 2 weeks might lead a technician to believe that a security is oversold. This is the case for VisionChina Media (NASDAQ:VISN), and Spreadtrum International (NASDAQ:SPRD).

While earnings for Spreadtrum Int. (NASDAQ:SPRD) were much better than the Street reacted, Spreadtrum runs full cycle, VisionChina Media (NASDAQ:VISN) looks to be in trouble for quite some time following weak earnings announcement. Related story: Earnings update: VISN goes bust but Canadian solar raises hopes for thew hole sector.

China Medical Technologies (NASDAQ:CMED) is similar to VISN - earnings hurt and it will take time before the stock recovers. Sutor Technology (NASDAQ:SUTR) fell as additional shares will flood the market, a fundamental weakness that will take time to overcome. Don't expect much from shares of the company on Monday.

Most oversold China 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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