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China stocks in narrow range on June 23

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eye June 23, 2010 (Chinavestor) Not a single Chinese stock is trading at extremes at the moment, according to the overbought and oversold indicator. Acorn International Inc. (NYSE:ATV) has steadily lost 12 percent since last Thursday and is now catching up with WuXi Pharmatech (NYSE:WX) and China Fire & Security Group (NASDAQ:CFSG).

Overbought stocks pulled back yesterday, just as expected. China Unicom (NYSE:CHU), Ctrip.com (NASDAQ:CTRP) and 51job Inc. (NASDAQ:JOBS) fell 2.47 percent, 3.47 percent and 0.44 percent, respectively. Gushan Environmental Energy Limited (NYSE:GU) managed to eke out a 1.1 percent gain.

Looking forward, momentum China stocks are ready to regain some of their mojo. 51job Inc. (NASDAQ:JOBS) is trading well above her trading envelope but the rally is fundamentally driven, suggesting more upside is possible though downside risk remins high.

China Unicom (NYSE:CHU) Hong Kong listed H-shares (HKG:0762) rose 0.39 percent earlier today, suggesting a similar trend might take place on the NYSE today. Regardless what direction the stock is going to go on Wednesday, upside looks limited for CHU for the short term.

Ctrip.com Int. (NASDAQ:CTRP) looks ready to challenge $45 again - the stock is far from being overbought. It's really market sentiment that will drive this blue chip on Wednesday.

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Acorn International Inc. (NYSE:ATV) is far from being oversold despite a 12 percent loss since last Thursday. The same is true for WuXi Pharmatech (NYSE:WX). Another stock with a disappointing performance is China Fire & Security Group (NASDAQ:CFSG). The company missed earnings target for the first quarter but promised more for the next one. Investors seem not to believe for a better quarter at this point.

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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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