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Oversold WX, ADY ready to rumble

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optimism March 15, 2010 (Chinavestor) Some of the most interesting action is taking place on the oversold monitor. Shares of WuXi Pharmatech (NYSE:WX) have been experiencing a sell-off but the stock is now oversold and ready for a comeback, according to the chart below. Shares of American Dairy Inc. (NYSE:ADY) are in a similar technical condition and a bounce back is likely.

City Telecom (NASDAQ:CTEL) has been on a slide for a week but more downside is possible, according to the chart below. Acorn International (NYSE:ATV) reported well below expectations and we're of a view that more downside is ahead for the stock. Five reasons to shun ATV after '09 Q4.

But the situation is different for WuXi Pharmatechc (NYSE:WX). For one, shares of WX have reached the theoretical lows suggesting the stock is now officially oversold.  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. So the bounce back will be based on technicals. The company reported a slight increase in revenues while earnings stayed flat, a not too impressive development, but better than Acorn's disastrous numbers. WuXi Pharma lacks growth, promises more.

Shares of American Dairy (NYSE:ADY) have been on the slide for a month by now and technicals suggests the company hit a bottom.

Most oversold Chinese shares

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Some of the most extreme stocks from the overbought monitor include Fushi Copperweld (NASDAQ:FSIN) - the stock is now overbought and is expected to take a breather. Fushi Copper reports record profit, strong sales - guides lower.

Shares of New Oriental Education (NYSE:EDU) and Giant Interactive (NYSE:GA) haven't reached theoretical highs yet suggesting more upside is possible.

LDK Solar (NYSE:LDK) has more upside as well according to the chart below. Now that all but one Chinese solar company reported quarterly reports LDK is looking good along Suntech Power (NYSE:STP). Complete '09 Q4 China solar stock guide.

Most overbought 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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