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SOHU helps overbought China ADRs

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advance5 July 26, 2010 (Chinavestor) Last week's rally pushed some Chinese ADRs over the edge and Shanda Games (NASDAQ:GAME), The9 Ltd. (NASDAQ:NCTY)  and Sina Corp. (NASDAQ:SINA) became overbought. Other stocks in the danger zone include Sinopec Shanghai Petrochemical (NYSE:SHI), Vanceinto Technologies (NYSE:VIT), NetEase.com (NASDAQ:NTES), and China Techfaith Wireless (NASDAQ:CNTF) to a lesser degree.

Investors will have to keep eyes on Sohu.com (NASDAQ:SOHU) and Changyou.com (NASDAQ:CYOU) for these two will report earnings before the open. They will reveal important insights into the internet advertisement and online game markets- potentially setting a tone for Shanda Games (NASDAQ:GAME), Netease.com (NASDAQ:NTES), The9 Ltd. (NASDAQ:NCTY) and Sina Corp. (NASDAQ:SINA). Given that Sohu.com (NASDAQ:SOHU) beat revenues and earnings estimates, the outlook is less grim for the stock just mentioned above.

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Stocks on the oversold end are out of the danger zone: with so much momentum going around, the oversold indicator is less useful today.

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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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