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CAEI and other overbought China stocks

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eye August 25, 2010 (Chinavestor) Despite a 5.7 percent advance on Tuesday, Trina Solar (NYSE:TSL) is not overbought. But a 46.9 percent jump in China Architectural Engineering, Inc. (NASDAQ:CAEI) certainly raises eyebrows.  Perfect World (NASDAQ:PWRD) has started to level off, moving away from theoretical highs as expected. The rest of the China stock universe is looking good from a technical point of view, but it's fundamentals that are in the driver seat lately.

The oversold end of the China stock list has little change from yesterday, expect that China Life Insurance (NYSE:LFC) is a large cap stock that rarely gets oversold like it is now. WuXi Pharmatech (NYSE:WX), a rather explosive stock is closes to theoretical lows, while the sudden drop in the price of Tiens Biotech Group (NYSE:TBV) looks excessive.

China Architectural Engineering, Inc. (NASDAQ:CAEI) is a stock that cleared 50 percent in just one day... huge volume, too. Given that the stock almost reached $1 a share, the price might not collapse right now despite the unusually huge jump.

Trina Solar (NYSE:TSL) cheered investors with a better-than-expected earnings report on Tuesday. But upside may be limited for the short-term due to weakness in energy prices. Nevertheless TSL looks like a value stock for the loner term.

Perfect Wolrd (NASDAQ:PWRD) was scraping the $27 level but might pause for now, according to the overbought monitor. The 11 percdent run followiong earnings release puts pressure on the stock at the moment, according to the overbought chart below.

OB_2010825

China Life Insurance (NYSE:LFC) was virtually unchanged in Hong Kong ahead of earnings, but it is important to notice that large cap, liquid China stock don't  get too oversold, like LFC is today. Should earnings surprise to the upside, China Life (NYS:ELFC) has a lot of upside for the short term.

WuXi Pharmatech (NYSE:WX) is a volatile stock that gets sexy from time to time. While more downside is possible - the stock hasn't reached theoretical lows yet - risky investors might bet on a resurgence of the stock.

Tiens Biotech (NYSE:TBV) fell hard - actually the hardest - in relative terms, suggesting a correction might take place, but not when the overall market heads south. Nevertheless it is worth keeping eyes open for this stock as well.

OS_2010825

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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