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More downside for oversold China stocks

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watch_out July 2, 2010 (Chinavestor) A pull back on Wednesday and Thursday took care of overbought China stocks and made the oversold screen full of excitement. There are no overbought Chinese stocks at the moment, Huaneng Power (NYSE:HNP) is out of the danger zone at the moment. Stocks with outstanding momentum include Global Sources (NASDAQ:GSOL), BMP Sunstone Corp. (NASDAQ:BJGP), NetEase.com (NASDAQ:NTES) and ReneSola Ltd. (NYSE:SOL).

Stocks to watch on the oversold screen include ATA Inc. (NASDAQ:ATAI), Origin Agritech (NASDAQ:SEED), City Telecom (NASDAQ:CTEL), China Green Agriculture (NYSE:CGA) Yanzhou Coal (NYSE:YZC), and Fuqi International (NASDAQ:FUQI).

Back to the overbought screen. Huaneng Power (NYSE:HNP), the largest Chinese independent power producer, is not overbought but fell in Hong Kong earlier today, suggesting the pull-back is going to continue on Friday.

Global Sources (NASDAQ:GSOL) has been fighting the $8 resistance level for the past two weeks. Chances are that the stock may be establish a price above the $8 range, based on the overbought chart below.

BMP Sunstone Corp. (NASDAQ:BJGP) experienced a remarkable 8 percent run in the lat two days - but volume was absent. The sharp increase on Wed-Thursday lifted the stock price from the low end of its trading range to above it, suggesting a technical correction is very possible.

Despite recent increases in the stock prices of NetEase.com (NASDAQ:NTES) and ReneSola Ltd. (NYSE:SOL), both stocks look neutral at this point. Stock prices for SOL and NTES remain within their normal trading range leaving room to the upside.

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The sudden drop in ATA Inc. (NASDAQ:ATAI) suggests the stock is now oversold however extremely low volume suggests a technical correction may have to wait.

Origin Agritech (NASDAQ:SEED) fell over 20 percent in the last five trading sessions and is now approaching theoretical lows. But market sentiment has to improve for SEED to establish a bottom.

City Telecom (NASDAQ:CTEL) fell eleven percent for the week on top of the 25 percent decline since April 2010. The stock hasn't reached theoretical lows yet, suggesting more downside is possible.

China Green Agriculture (NYSE:CGA) is another loser for the week with a 20 percent decline since Monday. The company is similar to Yanzhou Coal (NYSE:YZC) from a technical point of view: more downside is possible.

Fuqi International (NASDAQ:FUQI) tumbled over 30 percent this week, sending its shares way below the trading envelope. While a technical bounce back is possible, it is going to be a dead cat bounce, most likely. The stock has left plenty of long term downside risk.

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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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