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Profit taking to hurt overbought China stocks

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warning3 May 14, 2010 (Chinavestor) Stocks that are susceptible to a pullback after a significant rally include Vimictro International (NASDAQ:VIMC), Home Inns & Hotel Management (NASDAQ:HMIN), Global Sources Ltd. (NASDAQ:GSOL), Ctrip.com (NASDAQ:CTRP), China Fire & Securities Group (NASDAQ:CFSG), BMP Sunstone Group (NASDAQ:BJGP), and CNinsure (NASDAQ:CISG).

 

Spreadtrum Communications (NASDAQ:SPRD) continues to tower the most overbought China stocks list. With a 320% plus advance in the last 52 weeks, it may be time to take profits...

Vimictro Int. (NASDAQ:VIMC) went from $4.3 to over $4.7 in just a few days, prompting it to show big on the overbought monitor. When markets head south small cap stocks like VIMC can't fight the market. Investors, watch out!

Home Inns & Hotels Management (NASDAQ:HMIN) is like Ctrip.com International (NASDAQ:CTRP) - strong rally is due to outstanding quarterly report. Investors played Ctrip.com defensive before earnings, making it one of the most oversold China play. But then the stock burst through the seams and jumped over 10% for the week. Detailed reports are available at China stocks earnings calendar May 10-14.

Volatile stocks such as Global Sources (NASDAQ:GSOL), China Fire & Security Group (NASDAQ:CFSG) are in danger due to a relatively strong rally earlier the week. Profit taking might hurt BMP Sunstone Group (NASDAQ:BJGP) as well as CNinsure (NASDAQ:CISG).

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There has't been much change on the oversold screen since yesterday. Stocks that show weakness are those that reported disappointing financials. Click on links for details.

AOB 2010 Q1 revenue, earnings down from last quarter.

XSEL dives -30% as earnings disappoint.

Mindray 2010 Q1 disappoints, guides higher.

CBEH down 9% following 2010 Q1 numbers.

OS_2010514

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.

aexpl-obos



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