July 22, 2010 (Chinavestor) Shares of NetEase.com Inc. (NASDAQ:NTES), Sina Corp. (NASDAQ:SINA) and China Finance Online (NASDAQ:JRJC) have been leveling off - just as the overbought chart indicated.
Despite significant momentum, E-House Holdings (NYSE:EJ), Trina Solar (NYSE:TSL), Sinopec Shanghai Petchem (NYSE:SHI), Solarfun Power (NASDAQ:SOLF) and China Eastern Airlines (NYSE:CEA) look good ahead the bell on Thursday. But the sudden jump in the price of 3SBio (NASDAQ:SSRX) and China Sunergy (NASDAQ:CSUN) calls for caution.
Details: NetEease.com Inc. (NASDAQ:NTES) remains the closes to the theoretical high points and thus downside risk is still elevated. The same is true to a lesser degree for Sina Corp. (NASDAQ:SINA) and China Finance Online (NASDAQ:JRJC).
Chinese solar plays have been gaining strength ahead of earnings, Trina Solar (NASDAQ:TSL) outperforming the rest of the sector. Latest surge in China Sunergy (NASDAQ:CSUN) suggests the jump was too much but more upside is possible. Solarfun Power (NASDAQ:SOLF) looks more balanced than CSUN at this point.
China Eastern Airlines (NYSE:CEA) has more upside left just as is the case for Sinopec Shanghai Petrochemical (NYSE:SHI).
E-House Holdings (NYSE:EJ) is not only looking good on the overbought screen but policy shift in China sent property related stocks out the roof in Shanghai, earlier the day. China stocks shine in Asia on policy shift.
3SBio (NASDAQ:SSRX) looks different from the rest of the group: upside looks limited at this point.
Despite a significant drop in the price of Jinpan Int. (NASDAQ:JST) and Giant Interactive (NYSE:GA), more downside is possible for both stocks, according to the oversold indicator.
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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