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CHU and other overbought China stocks

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warning3 June 11, 2010 (Chinavestor) Momentum Chinese stocks reacted vividly to the surge of the DJIA on Thursday. Chinese telcos outperformed, as expected; China Unicom (NYSE:CHU), China Mobile (NYSE:CHL) and China Telecom (NYSE:CHA) all made it to the overbought monitor this morning. Synutra International (NASDAQ:SYUT) may slow down but has more room left to the upside. Home Inns & Hotels Management (NASDAQ:HMIN) is looking good before the open on Friday. The monitor caught the uptick in ATA Inc. (NASDAQ:ATAI) and Sinopec (NYSE:SNP) as well.

 

Most Chinese ADRs have moved away from theoretical lows, according to the oversold chart below. China Green Agriculture (NYSE:CGA) is gone from the list thanks to a 3% advance on Thursday.

 

Details: China Unicom (NYSE:CHU) has stretched herself too thin according to the overbought chat below and is ready to take a break. The overbought chart captured the sudden price increase for both China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL), but CHU has reached theoretical highs in addition. This makes investors to think that CHU is now susceptible to a pull back. China Telecom (NYSE:CHA) is also among the most overbought China plays but is lagging behind the sector.

But Home Inns & Hotels Management (NASDAQ:HMIN) has more room left to the upside, as the following chart testifies.

Synutra International (NASDAQ:SYUT) surprised investors on Thursday with a better-than-expected earnings. "Total revenues for the fourth quarter and ended March 31, 2010 were $82.4 million, representing a 13.4% increase YoY but a 14.9% decline QoQ. Consensus estimate was $72.26 million" Synutra swings back to profit! The stock needs a strong market day to keep going higher after a 32% run on Thursday.

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No China ADR is at extremes on the oversold end of the universe. China Green Agriculture (NYSE:CGA) is gone from the list and may creep higher after announcing: CGA to complete new R&D center by end of Dec.

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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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