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Overbought China stock list: GU, HNP

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warning2 June 29, 2010 (Chinavestor) There is a whole lot more room to the downside than to the upside, according to the overbought and oversold monitor below. There is not a single oversold China ADR from a technical point of view while Gushan Environmental Energy (NYSE:GU) and Huaneng Power Int. (NYSE:HNP) became overbought. There is room left to the upside for the rest of the China stock universe including China Unicom (NYSE:CHU) and New Oriental Education & Technology Group (NYSE:EDU) but changes are low that any of these stocks will be able to fight the market on Tuesday. Stocks on the oversold end draw attention are Yanzhou Coal (NYSE:YZC) and Sohu.com (NASDAQ:SOHU).

The 30 percent rally for Gushan Environmental Energy (NYSE:GU) was a rush for the ADR to get back to the dollar range. But that rally has stretched the stock too thin and is now susceptible to a correction.

Huaneng Power (NYSE:HNP), the largest independent power producer in China, is different from GU. This large cap company has been creeping higher since June 7 on high production rates and lower coal prices. Hong Kong listed H-shares of the company (HKG:0902) outperformed the market on Tuesday suggesting a relatively mild correction will make it for the stock on Tuesday.

China Unicom (NYSE:CHU) looks similar to HNP from a technical point of view - both stocks have enjoyed a 15-20 percent rally since June 8. While Tuesday may be a difficult day, outlook for longer term looks good for CHU.

New Oriental Education & Technology Group (NYSE:EDU) is up 14 percent since June 8 and is far from overbought, similarly to China Unicom (NYSE:CHU). There is more room left to the upside should market sentiment improve.

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Yanzhou Coal (NYSE:YZC) is the mosts oversold China ADR at the moment but hasn't reached theoretical lows yet. Hong Kong listed H-shares of the company (HKG:1171) earlier the day suggest the dip is going to continue on Tuesday.

Shares of Sohu.com (NASDAQ:SOHU) may disappoint many but there is more room left to the downside, according to the oversold chart below.

Outlook is dim for Linktone (NASDAQ:LTON), Synutra Int. (NASDAQ:SYUT) and the rest of the oversold China stock universe at this point. None of these stocks have reached or approached theoretical lows yet leaving more room to the downside.

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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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