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Overbought stocks slow down on July 29

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advance_8 July 29, 2010 (Chinavestor) There are three NASDAQ listed China stocks that are in the danger zone, according to the overbought chart below. These are Sohu.com (NASDAQ:SOHU) and Shanda Games (NASDAQ:GAME) and The9 Ltd. (NASDAQ:NCTY) from the online game sector. Giant Interactive (NYSE:GA) is the underdog among online gamers and is getting oversold. China Infrastructure Development (NASDAQ:CIIC) and Noah Education Hold. (NYS:ENED) might hit bottom soon, according to the oversold indicator. Overbought stocks might hang on to gains while market sentiment is strong, but are vulnerable when the tide chcanges. With that in mind, Sohu.com (NASDAQ:SOHU) and Th9 Ltd. (NASDAQ:NCTY) are truly overbought and ready to take a break. Shanda Games (NASDAQ:GAME) is another stock close to the danger zone.

The rest of the China stock universe looks balanced, at least from a technical point of view.

OB_2010729

China Infrastructure Development (NASDAQ:CIIC) reached theoretical lows and might pop any minute... But now that the stock is a penny stock, trading under a dollar per share, more selling pressure is coming...

Giant Interactive (NYSE:GA) fell hard for the week but more downside is possible, accor5ding to the chart below.

Noah Education Holdings (NYSE:NED) has been leveling off since Monday, following lowered guidance. Short term downside looks limited at this point. 

OS_2010729

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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