April 23, 2010 (Chinavestor) Overbought Chinese stocks are in danger as Greece's ills roil the markets. Global Sources Ltd. (Bermuda) (NASDAQ:GSOL), Cogo Group (NASDAQ:COGO), and China Finance Online (NASDAQ:JRJC) are obviously overbought, but investors have to pay attention to Changyou.com (NASDAQ:CYOU), ReneSola Ltd. (NYSE:SOL), China Eastern Airlines (NYSE:CEA) and New Oriental Education Corp. (NYSE:EDU) as well.
Details: Global Sources Ltd. (Bermuda) (NASDAQ:GSOL) and Cogo Group (NASDAQ:COGO), as well as China Finance Online (NASDAQ:JRJC) to a lesser degree, have not only advanced sharply in the last week but have approached theoretical highs as well. This makes a technician believe that the stock has risen too fast and too much and is ready for a pullback.
While the advance has been less starking, stocks in danger for Friday include Changyou.com (NASDAQ:CYOU), ReneSolar Ltd. (NYSE:SOL) and China Eastern Airline (NYSE:CEA). China's third largest airline fell -3.2% in Hong Kong earlier today, suggesting CEA is in danger ahead the bell on Friday.
Most overbought China stocks
China Bak Battery (NASDAQ:CBAK) and Xinyuan Real Estate Co (NYSE:XIN) became technically oversold, suggesting the turnaround is on the corner. Shares of Candian Solar (NASDAQ:CSIQ) fell significantly and are almost as oversold as CBAK or XIN. But when energy stocks suffer - as is the case for today - don't expect CSIQ to do much.
Chinese real estate stocks are oversold - though it may not be as obvious from the screen. Expect E-House Holdings (NYSE:EJ) and China Real Estate Information Co. (NASDAQ:CRIC) to bottom out - at least temporarily. Mobius Investment called real estate stocks a BUY based on valuation - and stocks have started to move up in Shanghai on Friday. Shares of Poly Real Estate (SHA:600048) rose +0.60% while the Shanghai Composite Index (SHA:000001) tumbled.
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.