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China stocks at extremes on Tuesday

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watch_5 May 4, 2010 (Chinavestor) The overbought / oversold indicator comes handy when stocks are trading at extremes - which is exactly the case for today. There aren't any overbought China stocks technically speaking, yet stocks with unusual momentum are susceptible to decline. China Unicom (NYSE:CHU), China Sunergy (NASDAQ:CSUN),  Baidu.com (NASDAQ:BIDU), Spreadtrum Communication (NASDAQ:SPRD), CNinsure Inc. (NASDAQ:CISG) and JA Solar (NASDAQ:JASO) are in the danger zone today.

Oversold stocks of interest include General Steel (NYSE:GSI), China Infrastructure Investment (NASDAQ:CIIC), Noah Education Corp. (NYSE:NED) and China Green Agriculture (NYSE:CGA).

Most overbought China stocks

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The oversold end of the China stock universe is just as active. General Steel (NYSE:GSI), China Infrastructure Investment (NASDAQ:CIIC) are technically oversold and are expected to turn around sometime this week. China Green Agriculture (NYSE:CGA) and Noah Education Corp. (NYSE:NED) are also stocks on the watch list for the rest of the week.

Most oversold China stock list

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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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