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More upside for CHL and other overbought China stocks

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strong_3 August 17, 2010 (Chinavestor) China Mobile (NYSE:CHL) took the lead on the overbought stock list, but is far from running out of steam. China Biotics (NASDAQ:CHBT)  isn't overbought either and Advanced Battery (NASDAQ:ABAT) has more upside left despite sizable gains on Monday. The oversold end of the China stock universe is relatively unchanged from Monday though Mindray Medical (NYSE:MR) looks more to settle in the bottom than it did on Monday.

Large cap China stocks don't get too close to theoretical highs, but more room is left to the upside for China Mobile (NYSE:CHL), according to the overbought chart below.

China Biotics (NASDAQ:CHBT) has just stepped out its trading envelope, suggesting technicals won't limit its upside for now.

Advanced Battery (NASDAQ:ABAT) made a V-shaped recovery over the last five trading days and with that, yesterday's 7.4 percent advance is not extraordinary. Should the market find a positive direction on Tuesday, expect ABAT to do well for the day.

China TechFaith Wireless (NASDAQ:CNTF) and AirMedia Group (NASDAQ:AMCN) are far from theoretical highs as well, suggesting more upside is possible.

OB_2010817

There hasn't been much change to the oversold end of the China stock universe. Giant Interactive (NYSE:GA), Vimicro Int. (NASDAQ:VIMC) and Tonjitang Chinese Medicines (NYSE:TCM) continue to lead the list of the oversold Chinese ADRs. The lack of a technical correction for Mindray Medical (NYSE:MR) suggests the stock might get stock in the $26 range for some time. Investors should give it a few more days to see if there is any interest in lifting the stock back to over $30.

China Yuchai International Limited (NYSE:CYD) looks simliar to Mindray Medical (NYSE:MR): both stocks fell hard following earnings release... But downside risk for CYD looks greater than for MR, according to the oversold monitor below.

OS_2010817

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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