July 20, 2010 (Chinavestor) Bargain hunters might find City Telecom (NASDAQ:CTEL) oversold but the day is not for bottom fishers. The overbought end of the China stock universe is more intriguing with stocks like Sina Corp. (NASDAQ:SINA), BMP Sunstone Corp. (NASDAQ:BJGP) or some solar plays like Trina Solar (NYSE:TSL) and Solarfun Power (NASDAQ:SOLF).
Despite a recent surge, Chinese solar stocks are not overbought, according to the chat below. Trina Solar (NYSE:TSL) has been one of the best performing Chinese solar stock followed by Solarfun Power (NASDAQ:SOLF). The appearance of Suntech Power (NYSE:STP), Rene Sola (NYSE:SOL) and JA Solar (NASDAQ:JASO) on the overbought screen testifies that the strength is not limited to a few selected names but the whole sector is gaining strength before earnings.
Sina Corp. (NASDAQ:SINA) advanced over 10 percent since last Tuesday but is not overbought yet.
BMP Sunstone Corp. (NASDAQ:BJGP) rose over 10 percent on Monday and is up 17 percent since last Tuesday - a significant stretch in just five short days. While the stock hasn't reached theoretical highs yet, downside risk looks higher than upside potential.
City Telecom (NASDAQ:CTEL) has been the most oversold China stocks for over a week and is now in a position where a turnround looks imminent. A 20 percent re-bounce is possible, though there is no guarantee that will happen.
Jinpan International (NASDAQ:JST) continued the slide on Monday after tumbling 20 percnet on Friday on lower outlook and weak preliminary numbers. While the fall is substantial, more downside is possible, according to the oversold chart below.
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.