March 23, 2010 (Chinavestor) Shares of China Eastern Airlines (NYSE:CEA) advanced +7.7%, making it the best performing Chinese ADR on Monday, but became overbought suggesting a correction is looming. City Telecom (NASDAQ:CTEL) is almost as close to theoretical highs as CEA but the sudden price increase over the last five days looks excessive. A stock less striking but important is Baidu.com (NASDAQ:BIDU), the largest Chinese search engine company. The stock price looks balanced entertaining the idea of the $600 mark.
Details: China Eastern Airlines (NYSE:CEA) is in trouble on Tuesday for a number of reasons. It is not only overbought after the significant rally on Monday but is fundamentally under pressure following a UBS downgrade of smaller rival Air China (HKG:0753). All three major Chinese airliners fell in Hong Kong today, suggesting their NYSE listed shares will have a hard landing as well. For additional coverage read China shares up in HK but fell in Shanghai on Tuesday.
City Telecom (NASDAQ:CTEL) has advanced five days in a row and ten days out of he last twelve trading sessions -suggesting the stock will have to take a break. For a technical analysis of the situation read Oversold CTEL rocks the house.
Shares of Baidu.com (NASDAQ:BIDU) advanced $10.07 on Monday following news of Google's exit from China. While Google is trying to circumvent Chinese censorship by moving operations to Hong Kong, it is far from certain that Chinese authorities will not retaliate, further diminishing Google's footprint in China. Baidu.com (NASDAQ:BIDU) commences two third of the Chinese search market already leaving no doubts about who will grab market share from Google.
Most overbought China stocks
Fuqi International (NASDAQ:FUQI) remains the most strikingly oversold China ADR today. While a bounce back up would make perfect sense, its chances are shrinking by the passing of each day. HQ Sustainable Maritime (AMEX:HQS) was just as oversold as FUQI until yesterday but thanks to a 4% rally her shares moved away from theoretical lows. Don't expect much from HQS today.
Linktone Ltd. (NASDAQ:LTON) fell -8% following 2009 Q4 earnings results last Friday and continued to show weakness the next trading day. The stock is still trading within her trading envelope suggesting more downside is possible.
China Green Agriculture, Inc. (NYSE:CGA) is similar to China BAK Battery (NASDAQ:CBAK) from a technical point of view - more downside is possible says the oversold monitor below.
Most oversold China 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.