June 3, 2010 (Chinavestor) Some of the best performing Chinese ADRs entered the danger zone, according to the overbought monitor below. Home Inns & Hotels Management (NASDAQ:HMIN) and eLong Inc. (NASDAQ:LONG) advanced sharply in the last five days, suggesting they need to take a break sooner than later.
Baidu.com (NASDAQ:BIDU) has been delivering sound quarterly reports one after the other. It is similar to that of Ctrip.com (NASDAQ:CTRP), another large Chinese NASDAQ listed ADR. Sina Corp. (NASDAQ:SINA) is another blue chip - though it is operating in a saturated market environment. Cogo Group (NASDAQ:COGO) fell hard right before earnings but the company surprised investors to the upside. This suggest price appreciation is here to stay - though it will be a bumpy road.
Sound fundamentals prelude sustainable recovery, something that WSP Holdings (NASDAQ:WH) is lacking. Despite recent surge, don't bet on much follow through from WH.
The oversold end of the China ADR universe is less eventful. JA Solar (NASDAQ:JASO) is considered oversold and with rising oil prices, outlook is bright for the short term. Suntech Power (NASDAQ:STP) has just reported a net income jump of ten fold from 2009 Q1 to 2010 Q1. This is another Chinese solar play delivering sound quarterly results.
The rest of the stocks on the screen have been trading in a narrow range, waiting for market sentiment to improve.
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.