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Momentum halts for China ADRs on Aug. 9

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stock_2 August 9, 2010 (Chinavestor) While momentum is drying up for most Chinese stocks, some of them are still trading dangerously close to theoretical highs. ChinaCast Education (NASDAQ:CAST) is taking the lead with Sohu.com (NASDAQ:SOHU) , China Digital TV (NYSE:STV) and Shanda Games (NASDAQ:GAME) following closely. Technical characteristics of Sina Corp. (NASDAQ:SINA) is similar to the group but is supported by a robust earnings report just a week ago. China Automotive Technologies (NASDAQ:CAAS) regained momentum before earnings, according to the overbought chart below.

 

ChinaCast Education (NASDAQ:CAST) has been virtually unchanged on Friday and rose only 3 percent for the week, yet is trading above its trading range highlighting downside risk.

Chinese internet portals, Sohu.com (NASDAQ:SOHU) and Sina Corp. (NASDAQ:SINA) advanced on strong earnings but might take a breather earlier this week. Tencent Holdings (HKG:0700), the largest Chinese internet portal, is going to report earnings later this week, giving investors full visibility into the sector.

Shanda Games (NASDAQ:GAME) has been strong for over a month as the stock is catching up with the rest of the sector. Shares of the company fell close to 40 percent earlier the year. Perfect World (NASDAQ:PWRD) is on the lower end of the overbought screen, another online game developer and operator, that was underdog earlier this year.

China Digital TV Holding (NYSE:STV) looks similar to Sohu.com (NASDAQ:SOHU) from a technical point of view; upside potential looks limited at this point.

China Automotive Technologies (NASDAQ:CAAS) advanced 13.4 percent last week ahead of earnings released this week. The stock has been extremely volatile and this trading characteristics is here to stay...

OB_201089

The oversold end of the China stock universe is relatively uneventful, expect for Global Sources (NASDAQ:GSOL). Despite a 12.7 percent tumble for the week, with a 5.4 percent of it on Friday, shares of the company are not oversold yet. More downside is a real possibility.

OS_201089

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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