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Vulnerable overbought China stocks on Tuesday

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warning3 April 6, 2010 (Chinavestor) With a strong rally on their back, Chinese ADRs are on the move. Energy stock led the DJIA higher for the week - and so did Chinese energy stock pulling Chinese indices higher. China Petroleum & Chemical Corp. (NYSE:SNP) is the most overbought China stock this morning - expect it to take a breather on Tuesday. Shares of China Telecom (NYSE:CHA) seem to be almost as vulnerable as that of Sinopec (SNP). Yanzhou Coal (NYSE:YZC), the third largest Chinese coal company, has advanced +10.7% in the last five trading sessions but may extend the rally based on strong performance of coal companies in Shanghai earlier today. Contrary to coal companies, insurers fell the most in Shanghai today, suggesting momentum is drying up for China Life Insurance Co. Ltd. (NYSE:LFC). UTStarcom (NASDAQ:UTSI) has been leveling off in the $2.80-$2.90 range from the $2.40s and might fight for the $3.0 range. But the 20% plus jump last week is calling for a breather today. Another big mover is Petrochina (NYSE:PTR), the largest Chinese oil producer. Despite a sizable lift from last week, shares of the company are far from overbought and are expected to show resilience. 

Most overbought China stocks

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Oversold stocks include China Grentech (NASDAQ:GRRF) and A-Power Energy Generation Systems (NASDAQ:APWR). But shares of Xinyuan Real Estate Co., Ltd. (NYSE:XIN) haven't reached bottom yet, according to the oversold monitor.

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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