April 1, 2010 (Chinavestor) The number of overbought and oversold China stocks is on the rise and is expected to remain that way as excitement around Chinese stocks increases. Strong manufacturing data, rising purchasing managers' index, mounting pressure on the yuan, introduction of index-futures, margin trading and short selling, earnings rolling in - just to name a couple of factors that contribute to the China stock exuberance.
Strong market days historically favor momentum stocks and sectors and as such expect superb performance from the Chinese solar sector. Rene Solar (NYSE:SOL), Solarfun Power Holdings (NASADAQ:SOLF), Trina Solar (NYSE:TSL) and Canadian Solar (NASDAQ:CSIQ) all look good today. China Telecom (NYSE:CHA) is not overbought thanks to a break yesterday and is ready to resume the rally. Yanzhou Coal (NYSE:YZC) is expected to extend the rally but is getting overbought. Today may be a good day to take profits. Focus Media Holdings (NASDAQ:FMCN), China Life Insurance (NYSE:LFC) all look good before the bell today.
Most overbought China stocks
WSP Holdings (NYSE:WH) is down on earnings, just as is Simcere Pharma (NYSE:SCR) and American Oriental (NYSE:AOB). Despite recent losses these stocks are far from being oversold and are not expected to do much today. A-Power Energy (NASDAQ:APWR), Spreadtrum Co.. (NASDAQ:SPRD), Hutch Tel. (NYSE:HTX) are oversold, might pop up - or just stay oversold from some time.
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.