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Earnings make a difference, says the overbought monitor

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cash1 May 13, 2010 (Chinavestor) There has been a dramatic change taking place in the last few days  within the Chinese ADR universe from a technical point of view. While there hasn't been any overbought China stock to speak of earlier the week, the overbought monitor is full of action by Thursday morning. Some of it is earnings related: Home Inns & Hotels Management (NASDAQ:HMIN), Ctrip.com International (NASDAQ:CTRP) or 51job Inc. (NASDAQ:JOBS) advanced thanks to superb earnings. But Silvercorp Metals (NYSE:SVM) is in trouble after missing estimates last night, and Spreadtrum Comm. (NASDAQ:SPRD) and Baidu.com (NASDAQ:BIDU) became overbought. The monitor caught the significant uptick of Vimictro International (NASDAQ:VIMC) in the last hours of trading on Wednesday.

Disappointing earnings punished Xinhua Sports & Entertainment (NASDAQ:XSEL), American Oriental Bio (NYSE:AOB) and Mindray Medical (NYSE:MR) while oversold China Eastern Airlines (NYSE:CEA) is ready to bounce back off on fundamentals.

Investors have to ask themselves where the ceiling for Spreadtrum Communications (NASDAQ:SPRD) is going to be? The stock advanced +316% in one month, something that's highly unusual. The stock is clearly overbought suggesting time has come to take profits.

Baiduc.om (NASDAQ:BIDU) is almost as overbought after a 10% advance on Wednesday. The 1:10 stock split helped the stock price to get back from the stratosphere, making it appealing for retail investors again. Increased volatility is behind the latest surge.

Home Inns & Hotels Management (NASDAQ:HMIN) jumped thanks to a strong 2010 first quarter. Home Inns & Hotel delivers sound 2010 Q1.

Ctrip.com International (NASDAQ:CTRP), another Chinese blue chip, swung back from the most oversold China play on Monday to one of the hottest commodity by Wednesday. Ctrip 2010 Q1 doesn't disappoint.

Silvercorp Metals (NYSE:SVM) is in the danger zone for Thursday. There has been tremendous expectations that the company will deliver better than previous guidance but according to the latest numbers released last night, the opposite is true. Silvercorp Metals misses estimates, guides lower...

51job Inc (NASDAQ:JOBS) looks strong, may be too strong, at this point, after a surprisingly solid 2010 Q1 report. 51job ready to rumble on 2010 Q1 growth.

OB_2010513

Most oversold stocks are suffering as a result of a weak 2010 Q1 financial report. But China Eastern Airlines (NYSE:CEA) fell 6 days in a row but rallied in Hong Kong earlier the day, suggesting the worst is over.

Xinhua Sports & Entertainment (NASDAQ:XSEL) fell hard - XSEL dives -30% as earnings disappoint.

American Oriental Bioengineering (NYSE:AOB) wasn't any better - AOB 2010 Q1 revenue, earnings down from last quarter.

Mindray Medical (NYSE:MR) is somewhat different; though it got punished for lack of growth, outlook is much brighter fro MR then for AOB or XSEL, Mindray 2010 Q1 disappoints, guides higher.

OS_2010513

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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