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China stock watch list for August 18

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watch_5 August 18, 2010 (Chinavestor) The triple digit gain in the DJIA on Tuesday had a profound impact on Chinese ADRs. The overbought end of the China stock universe is active again, investors have to pay attention to stocks such as ChinaTechfaith Wireless (NASDAQ:CNTF), Rino International (NASDAQ:RINO) and 51job Inc. (NASDAQ:JOBS) or large cap China Mobile (NYSE:CHL). Huaneng Power International (NYSE:HNP) is in talks to buy InterGem stake, feeding its rally. One of the biggest looser lately is Qiao Xing Mobile (NYSE:QXM), but despite a 4 day loosing streak more downside is possible.

Like I said, the overbought end of the China stock universe commences more attention today. China TechFaith Wireless (NASDAQ:CNTF) advanced 15 percent in the last three days - but is becoming overbought. While the stock hasn't reached theoretical highs yet, the stretch from $2.7 to $3.2 in three days looks unusual for the company.

Rino International (NASDAQ:RINO) is fueled by second quarter earnings, announced on Monday. The company guided in-line, reaffirming 2010 FY revenue guidance. The stock traded as high as $34 last November but tumbled to $11 in June this year. There has been a lot of interest for the stock but investors have to realize that this is a trading stock with sizable price swings going forward.

51job Inc. (NASDAQ:JOBS) is trading way above its normal trading range after a 40 percent surge in the last 30 days. While the stock price hasn't reached theoretical highs yet, selling pressure is building behind the scenes.

While we were bullish about China Mobile (NYSE:CHL) yesterday, current technical reading on the overbought monitor suggests CHL hit a temporary peak and is subject to take a break. Large cap stocks, such as CHL, don't get to extreme overbought position before succumbing to profit taking. Investors have to watch out for China Mobile (NYSE:CHCL) on Wednesday.

Huaneng Power International (NYSE:HNP) delivered strong fundamentals and is now in talks to buy a stake in InterGen, a Massachusetts-based electric utility. The stock is still trading within its trading range, more upside is possible, according to the overbought monitor. Additional coverage: China Huaneng Looking To Buy InterGen Stake.

OB_2010818

There hasn't been much change in the oversold end of the China stock universe from yesterday, except for Qiao Xing Mobile (NYSE:QXM). Despite a significant decline in he past three days, more downside is possible for the stock, according to the oversold chart below.

OS_2010818

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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