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China stocks watch list for Tuesday, March 30

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cash_1 March 30, 2010 (Chinavestor) The number of China stocks trading at extremes is relatively low today. China Telecom (NYSE:CHA) and LDK Solar (NYSE:LDK) are trading the closes to theoretical highs - but aren't necessarily overbought. Hong Kong listed H-shares of China Telecom (HKG:0728) rose +2.11% today, suggesting more upside is possible for China's fastest growing* mobile carrier. Price of the crude rose to three months high helping Chinese solar makers to advance. ReneSola Ltd. (NYSE:SOL) advanced 5 days in a row yet is far from overbought, as the following chart testifies. Momentum stocks similar to SOL on the overbought screen include China Yuchai International Limited (NYSE:CYD), Yanzhou Coal (NYSE:YZC) and China Grentech (NASDAQ:GRRF).

While it took five days for ReneSola (NYSE:SOL) to advance +18.5%, China Yuchai International Limited (NYSE:CYD) cleared even more just in one day yesterday. But neither stocks are trading near theoretical highs yet, suggesting more upside is possible. For more coverage of the Chinese solar sector, read: Complete 2009 Q4 China solar stock guide.

Shares of China Grentech (NASDAQ:GRRF) advanced +20% in the last two trading days. The good news is that both big upticks were accompanied by significant underlying volume, suggesting strong money flows will keep the stock price from falling back.

Shares of Yanzhou Coal (NYSE:YZC), China's third largest coal miner, jumped in the last two trading sessions. Coal price in China correlates very closely with oil prices, so when the crude is at 3 months high, so is coal. As a matter of fact, coal price advanced +0.7% on Tuesday compared to last week, according to the China Coal Transport & Distribution Association. Another positive development for miners is that a severe drought in the south of the country has cut hydropower generation increasing the demand from coal- fired power units.

*measured in percentage change in total number of mobile subscribers from 2008-2009

Most overbought China stocks

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Spreadtrum Comm. (NASDAQ:SPRD) remains the most oversold China stock, making investors wonder where the bottom is going to be. We're of a view that even NASDAQ listed small cap China play move eventually away from the bottom - suggesting SPRD is a technical buy at current prices.

The oversold monitor caught the sharp drop in price of Perfect World (NASDAQ:PWRD). Shares of the company have fallen five days in a row suggesting the bottom is near. PWRD is another stock that is ripe for a technical correction and swing back up.

Most oversold China stocks

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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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