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Oversold China ADRs set to bounce back

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think_1 June 30, 2010 (Chinavestor) Yanzhou Coal (NYSE:YZC) became the most oversold China ADR and is set to bounce back on Wednesday. Looking at Chinese stocks that suffered the most relative to their standard price movement on Tuesday, (measured by the size of the arrow) Baidu.com (NASDAQ:BIDU) is taking the lead followed by Ctrip.com Int. (NASDAQ:CTRP) and Sina Corp. (NASDAQ:SINA). Ata Int. (NASDAQ:ATAI) is the true leader but the oversold indicator works best for liquid stocks.

Ctrip.com (NASDAQ:CTRP) fell over 10 percent on Tuesday, a highly unusual drop for the stock. Another liquid, large cap China play with a substantial loss is Baidu.com (NASDAQ:BIDU). The stock went from above trading envelope to the low end of it, suggesting a quick bounce back up is the most likely scenario.

Sina Corp. (NASDAQ:SINA), another liquid internet stock, fell way too much, according to the oversold screen below.

OS2_2010630

 

The traditional oversold report suggests Yanzhou Coal (NYSE:YZC) is ready for the turn around for two reasons: it fell sharply plus has approached theoretical lows as well. But Syntura Int. (NASDAQ:SYUT), Vimicro Int. (NASDAQ:VIMC) or Focus Media Holdings (NASDAQ:FMCN) hasn't reached theoretical lows yet, suggesting downside risk prevails.

OS_2010630

Gushan Environmental Energy (NYSE:GU) remains overbought despite a pullback on Tuesday. Huaneng Power Int. (NYSE:HNP) is looking good from an overbought point of view but upside potential looks limited.

OB_2010630

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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