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Oversold China ADRs for bottom fishing

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bottom_fishing_1 May 20, 2010 (Chinavestor) While the overbought end of the China ADR universe lacks action, the oversold end is just way too busy. News additions from yesterday include China-Biotics (NASDAQ:CHBT), Solarfun Power (NASDAQ:SOLF), China Finance Online (NASDAQ:JRJC), ChinaEdu Corp. (NASDAQ:CEDU), China Architectural Engineering, Inc. (NASDAQ:CAEI), and China Green Agriculture (NYSE:CGA). Large cap stocks such as Petrochina Co. (NYSE:PTR) and Aluminum Corp. of China (NYSE:ACH) don't get oversold too often, something investors should keep in mind.

The steep fall of Baidu.com (NASDAQ:BIDU) is the most important event on the overbought chart.

Back to the oversold stock list. Shares of China-Biotics (NASDAQ:CHBT), China Automotive Systems (NASDAQ:CAAS), City Telecom (NASDAQ:CTEL), Vanceinfo Technologies (NASDAQ:VIT) and Solarfun Power (NASDAQ:SOLF) have reached theoretical lows, suggesting a technical correction is imminent. However no stock can fight the market - so timing is dependent upon overall market condition. Nevertheless these stocks present turnaround opportunities.

The oversold monitor picked up the unusual fall of China Finance Online (NASDAQ:JRJC) and ChinaEdu Corp. (NASDAQ:CEDU). Another stock to pay attention to is China Architectural Engineering, Inc. (NASDAQ:CAEI), a stock that fell 16% following disappointing earnings on Wednesday.

China Green Agriculture (NYSE:CGA) is sold off for no particular reason.

Large cap Petrochina Co. (NYSE:PTR) advanced in Hong Kong and Shanghai earlier today, and Aluminum Corp. of China (NYSE:ACH) is a resource play that is a bargain under $20.

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There are no overbought China plays technically speaking. Spreadtrum Comm. (NASDAQ:SPRD) and Vimictro International (NASDAQ:VIMC) have been weathering the strong the best, but don't expect much upside from either of them today.

Baidu.com (NASDAQ:BIDU) fell 10% over the last five days and is expected to follow overall market sentiment today. But watch out, this stock is highly explosive and might jump 5%-10% a day.

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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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