April 14, 2010 (Chinavestor) Volatility is back for China stocks - says the title and is evidenced by the increasing number of momentum stocks in the overbought and the oversold screen. The good news is that none of the momentum stocks are overbought - at least they haven't reached theoretical highs as of yet. LDK Solar (NYSE:LDK) is looking good again, just as is China Mobile (NYSE:CHL) or Chindex International (NASDAQ:CHDX). Sinopec (NYSE:SNP), the largest refinery in Asia by volume, looks vulnerable - stocks of that caliber don't get overbought that often. The party is over, at least temporarily, for Vanceinfo Technologies (NYSE:VIT) but the rally may resume as of today. AgFeed Industries (NASDAQ:FEED) and Zhongpin Inc. (NASDAQ:HOGS) are not overbought despite recent show of strength!
Back to the overbought screen. China Mobile (NYSE:CHL), Zhongpin Inc. (NASDAQ:HOGS) and AgFeed Industries (NASDAQ:FEED) have the most momentum - but are not overbought according to the chart below. LDK Solar (NYSE:LDK) has been virtually unchanged in the last three trading days - but is ready to resume the rally today. Chindex Int. (NASDAQ:CHDX) and Sinopec (NYSE:SNP) are somewhat is danger as the following chart testifies. And Vanceinfo Technologies (NYSE:VIT) is ready to head north again after taking a breather.
Most overbought China stocks
There are no oversold stocks that the moment. Stocks with significant loss of momentum include Sutor Technology Group (NASDAQ:SUTR), Perfect World (NASDAQ:PWRD) and China Housing and Land Development (NASDAQ:CHLN). While these stocks have suffered in the last five trading days, the worst might not be over just yet, according to the oversold indicator 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.