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China ADRs trading in a narrow range in May

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currency_2 June1, 2010 (Chinavestor) The overbought indicator highlights technical strength of China Unicom (NYSE:CHU), Home Inns & Hotel Management (NASDAQ:HMIN), Spreadtrum Communication (NASDAQ:SPRD), and eLong Inc. (NASDAQ:LONG). Huaneng Power (NYSE:HNP) remains oversold.

Details: There are no overbought Chinese stocks at the moment from a pure technical point of view. China Unicom (NYSE:CHU) rose 1.2% on Friday or 5.6% for last week - yet it hasn't reached theoretical highs yet.

The overbought chart suggests more upside is possible for Home Inns & Hotels Management (NASDAQ:HMIN) as well. The 12.3% advance last week may put a strain on the stock for the short term but the stock is not overbought, leaving additional room to the upside. As always, don't expect HMIN to fight the market on Tuesday but keep this stock in mind for the rest of the week.

Spreadtrum Communications (NASDAQ:SPRD) has been extremely resilient in the month of May, advancing 59.7% despite a broad sell-off of Chinese equities. Investors may enjoy the ride on the back of this NASDAQ play - despite a strong 2009-2010 showing.

Shares of  eLong Inc. (NASDAQ:LONG) advanced 10% last week and went from the low end of its trading envelope to the high end of it. More upside is possible - but that might have to wait when overall market sentiment improves. Tuesday is gong to be a difficult day for small cap China ADRs.

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Huaneng Power (NYSE:HNP) is oversold and is sticking out of the crowd on Tuesday morning. Shares of Datang Power (HKG:0991) rose 1.3% on Tuesday as coal prices subdued. Expect HNP to show some strength for the rest of the week.

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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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