March 11, 2010 (Chinavestor) Top three China stocks with the highest impact on the overbought chart today are in the danger zone! Fushi Copperweld Inc. (NASDAQ:FSIN) surged +32.5% in the last five days, E-House Holdings (NYSE:EJ) has a similar pattern with a smaller magnitude, and China Southern Airlines (NYSE:ZNH) hit resistance in Hong Kong this morning suggesting upside is limited from now on. The oversold chart suggests more downside is possible for WuXi Pharmatech (NYSE:WX). Notable stocks with no extreme technicals include Baidu.com (NASDAQ:BIDU), a stock that touched $550 briefly on Wednesday.
Shares of Fushi Coperweld (NASDAQ:FSIN) jumped +5.95% on Wednesday following strong revenue and earnings growth. The Street has been expecting such positive developments pushing the share price up +20% before the news broke out. But investors have to exercise caution from now on because the stock became overbought -as the following overbought chart reveals. Related story: Fushi Copper reports records record profit, strong sales - but guides lower.
Shares of E-House Holdings (NYSE:EJ) surged right before and after earnings earlier this week and have shown additional strength on Wednesday - but again, the stock became overbought! This suggests that upside potential is lesser than downside risk. 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. With strong fundamentals on its back, EJ is a good stock for the value buyer. Best advice is buying it in a dip. Related coverage: Banner year for EJ with cash dividend.
China Southern Airlines (NYSE:ZNH) had two huge gap up in the morning with flat trading to follow. But that is about to end according to the overbought indicator. Plus Hong Kong listed H-shares of China Southern Airlines (HKG:1055) hit a resistance level on Thursday and fell -0.86%, telling U.S. investors the party is over in Asia.
Another stock that's screaming off the overbought chart is China Finance Online (NASDAQ:JRJC). With an +18% advance in the past few days, earnings better be good on March 16 else many investors will lose their shirts.
Shares of Baidu.com (NASDAQ:BIDU) has been creeping higher throughout the week to touch above $550 for the first time in history. The stock has been on a six day winning streak, suggesting a break will have to come sooner than later. But with a relatively neutral overbought reading, Baidu.com (NASDAQ:BIDU) might make it to $600... Baidu makes it to $550.
Most overbought China stocks
The oversold end of the China stock universe is missing action. Most oversold stock have bottomed out and are looking for a reason to make a comeback. But in the absence of such catalyst WuXi Pharmatech (NYSE:WX) steels the story of the day. The company reported on March 9 but failed to impress investors as the oversold chart reveals. WuXi Pharma lacks growth, promises more.
Most oversold China stock list
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.