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China stock watch list for June 10, 2010

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advance8 June 10, 2010 (Chinavestor) There is not a single overbought China stock this morning. China Medical Technology (NASDAQ:CMED), China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) are only stocks with noticeable momentum.

More telling is the oversold chart below. JA Solar (NASDAQ:JASO) remains the most oversold China ADR. The company has lost 28% of its market cap in just one month, but the slide will have come to a stop. JASO is a stock for thought for value investors.

City Telecom (NASDAQ:CTEL) is an interesting stock. It went from $2.7 at the beginning of 2009 to $15 in one and half years but has been falling since. The steep decline will have to come to a halt as well.

The oversold indicator picked up the 15% decline in the price of China Sky One Medical, Inc. (NASDAQ:CSKI) in the last five trading days. While the decline may seem excessive the stock is still far from the oversold position. This is very similar to the situation with ShengdaTech, Inc. (NASDAQ:SDTH). Despite a significant fall, the true bottom may be further away.

OS_2010610

China Medical Technology (NASDAQ:CMED) rose 20% last Friday following better-than-expected quarterly results - starting a turnaround for industry leader Mindray Medical (NYSE:MR) as well. Though much of the rally has leveled off there is more room left to the upside. With market sentiment improving, CMED is a candidate for a strong rally.

Chinese telecoms have started to show strength lately, evidenced by the appearance of China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) on the overbought screen. Despite latest gains, both stocks have much more room left to the upside.

OB_2010610

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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