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China stocks to watch on June 7, Monday

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watch_4 June 7, 2010 (Chinavestor) The overbought monitor is missing action following sharp declines in share prices last week. Stocks with unusual momentum include Vimicro International (NASDAQ:VIMC), eLong Inc. (NASDAQ:LONG), Hurray! Holdings (NASDAQ:HRAY) and Shanda Interactive (NASDAQ:SNDA).

The oversold end of the China stock universe presents a few stocks worth paying attention: Huaneng Power (NYSE:HNP), Silvercorp Metals (NYSE:SVM), Yanzhou Coal (NYSE:YZC), China Fire & Security Group (NASDAQ:CFSG) and China Transinfo Tech. (NASDAQ:CTFO). The good news is that most of these stocks fell on market weakness and not on stock specific news. So when market sentiment improves, these stocks are expected to lead the turn around.

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Huaneng Power (NYSE:HNP) is less oversold than last week but is definitely a stock value investors should pay attention to. The company reported a net income growth of over 40% last quarter, but warned of overcapacity related margin pressures ahead.

Silvercorp Metals (NYSE:SVM) had a significant run-up before earnings in May but fell hard after coming out short of expectations. This stock might remain under water for the next month or so.

Yanzhou Coal (NYSE:YZC), the third largest Chinese coal maker, is oversold due to falling oil and coal prices. Price of coal is correlating with price of oil in China very closely, thus hurting coal miners lately. But the sell-off is overdone according to the oversold chart below.

China Fire & Secutirty Group (NASDAQ:CFSG) and China Transinfo Tech. (NASDAQ:CTFO) are not oversold technically speaking but are worth paying attention to. These stocks are volatile in nature but might come handy in bullish times.


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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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