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China stock watch list, June 18

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telescope1 June 18, 2010 (Chinavestor) Downside risk exceeds upside potential for 51job Inc. (NASDAQ:JOBS), China Unicom (NYSE:CHU), and New Oriental Education & Tech. Group Inc (NYSE:EDU). Increased volatility suggests investors are looking for direction for Home Inns & Hotels Management (NASDAQ:HMIN). 3SBio Inc. (NASDAQ:SSRX) pulled back after it got overbought - just as we pointed it out yesterday. Despite latest rally, shares of Ctrip.com (NASDAQ:CTRP) have more upside left, according to the overbought chart.

Low volume makes it difficult to time Hurray! Holdings (NASDAQ:HRAY) right, but this stock besides Shanda Interactive (NASADAQ:SNDA) and Synutra International (NASDAQ:SYUT) are China plays of interest on the oversold chart today.

51job Inc. (NASDAQ:JOBS) soared another 7.3% on top of the gains a day before - but became overbought, according to the following chart. The stock looks very similar to 3SBio Inc. (NASDAQ:SSRX) a day before - Be careful with overbought China stocks on Thursday! - and is susceptible to a pullback. 3SBio Inc. (NASDAQ:SSRX) fell 4.05% on Thursday.

China Unicom (NYSE:CHU) has been leveling off yet remains in the danger zone. With a 1.9% tumble in Hong Kong earlier today, it is certain that China's second largest mobile carrier will fall on Friday.

Home Inns & Hotels Management (NASDAQ:HMIN) is different from the rest of the group. The company reported sound financial report with a sweetened outlook, but is now looking for direction following the surge. Wild price swings earlier this week testify that investors are nervous based on valuation. But fundamentals tend to prevail for a longer time horizon, suggesting HMIN have more upside left.

New Oriental Education & Tech. Group Inc (NYSE:EDU) looks to be stretched too thin following a six days winning streak. We stick to our story we spelled out two days earlier: "New Oriental Education & Tech. Group Inc. (NYSE:EDU) may touch $100 briefly but the overbought monitor suggests the run-up is too fast and might end in a sudden correction." Overbought China stocks to watch on June 16.

Ctrip.com International (NASDAQ:CTRP) has been leveling off in the last two days but is looking good on the overbought chart below. Despite clearing 14% in the last five trading days, more upside is possible for this volatile internet stock.

OB_2010618

Hurray! Holding (NASDAQ:HRAY) is a low volume NASDAQ China play, making it difficult to time it right. Yet the oversold chart testifies an upswing is within the cards.

Shanda Interactive (NASDAQ:SNDA) is not oversold but current weakness is highly unusual for an industry leader such as this. Based on technicals and fundamentals combined, Shanda Interactive (NASDAQ:SNDA) is nearing the bottom. It may be the right time to buy into weakness under $40.

Synutra International (NASDAQ:SYUT) advanced from $17 to $24 following better-than-expected earnings a week before, but profit taking took a toll on the stock. It's not back to square one, but fundamentals suggests an upswing is a real possibility. Synutra swings back to profit!

OS_2010618

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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