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CTEL and other overbought - oversold China stocks

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rotation March 22, 2010 (Chinavestor) With a 20% advance on its back, shares of City Telecom (NASDAQ:CTEL) became overbought. Other less obvious momentum stocks include Noah Education Holdings (NASDAQ:NED), Perfect World (NASDAQ:PWRD) and Nam Tai Electronics (NYSE:NTE). The oversold indicator caught the steep fall of Spreadtrum Communications, Inc.(NASDAQ:SPRD) while China TechFaitrh Wireless (NASDAQ:CNTF) continued to slide, suggesting a bottom is near.


It looks to us that most of the action is going to take place on the oversold end of the China stock universe on Monday. FUQI International (NASDAQ:FUQI) and HQ Sustainable Maritime (AMEX:HQS) are screaming off the oversold chart below. By definition, oversold is 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.

Less dramatic but significant fall of China TechFaith Wireless (NASDAQ:CNTF) suggests the stock is oversold as well. SPRD is near theoretical lows, suggesting the stock has bottomed out.

Most oversold China stocks

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The overbought end of the ChHina stock list is less dramatic, except for City Telecom (NASDAQ:CTEL). To see how the stock went from oversold to overbought within a week, read: Oversold CTEL rocks the house. Additional pressure on telecoms today came from China Telecom (NYSE:CHA), the largest Chinese fixed line carrier. The company reported 2009 full year financials. China Telecom 2009 H2 revenue increase but net income shrinks.

Shares of China Digital TV Holdings (NYSE:STV) and New Oriental Education (NYSE:EDU) are looking good ahead of the bell. These stocks have strong momentum but aren't oversold yet.

Most overbought China stocks

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