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China stocks ready to rumble, says the overbought indicator

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advance6 April 29, 2010 (Chinavestor) If anything, 51job Inc. (NASDAQ:JOBS) became overbought according to the indicator below. China Unicom (NYSE:CHU) reported 2010 Q1 net fall profit of 68% as 3G marketing cost soared; the stock fell -3.2% in Hong Kong earlier today foretelling a similar performance on the NYSE for today. Global Sources (NASDAQ:GSOL), Silvercorp Metals (NYSE:SVM) and Mindray Medical (NYSE:MR) are all in a position to extend their rally.

Stocks that are expected to do well on Thursday include oversold energy plays - Suntech Power (NYSE:STP) in particular. Guangshen Rail (NYSE:GSH), Harbin Electric (NASDAQ:HRBN) and Sohu.com (NASDAQ:SOHU) are all poised to take advantage of the rally on Thursday.

Baidu.com (NASDAQ:BIDU) is not overbought yet... The company is up $95 in pre market trading well above $700 as earnings more than doubled and the company issued a 2010 Q2 revenue guidance above analysts' estimates. So expect BIDU to show up on the overbought screen tomorrow.

Momentum stocks are poised to take advantage of a strong market day on Thursday. Mindray Medical (NYSE:MR) is a solid value stock and has more upside left. Silvercorp Metals (NYSE:SVM) bounced back strongly on Wednesday but the stock is far from being overbought. The rally may well get extended to Thursday. Global Sources (NASDAQ:GSOL) advanced for the seventh day in a row and is plateauing. 51job Inc. (NASDAQ:JOBS) is similar to GSOL at this point:the rally is losing steam.

Most overbought China stocks

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There hasn't been much change in the top of the oversold China stocks list - except for the arrival of Jinpan Int. (NASDAQ:JST). The stock lost -22.8% on Wednesday on worse-than-expected preliminary numbers. Experience suggests that JST will bounce back up in a few days time after such dramatic tumble. Chinese power generators lost momentum - suggests the technical reading of Huaneng Power (NYSE:HNP)  and Harbin Electric (NASDAQ:HRBN). High coal prices squeeze out profits from power generators sending shares of HNP and HRBN lower. While power companies will bounce back up, that may have to wait until tomorrow.

Strong energy prices will propel Chinese solar makers higher. Suntech Power (NYSE:STP) is way too oversold for such eventuality - expect it to do well today.

Guangshen Rail (NYSE:GSH) and Sohu.com (NASDAQ:SOHU) lost momentum lately but are both ready to turn around. Internet stocks will get a boost from Baidu.com (NASDAQ:BIDU) today while strong economic outlook helps GSH, a railway company operating in the Pearl River Delta region , China's economic hotbed.

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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