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China stocks at extremes on August 27

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decline2 August 27, 2010 (Chinavestor) There is not a single overbought China stock to be aware of this morning. Perfect World Co. (NASDAQ:PWRD) has been losing steam while China Architectural Engineering (NASDAQ:CAEI) pulled back after the 49 percent jump earlier the week. Zhongpin Inc. (NASDAQ:HOGS) is looking good from a technical point of view as well. Acorn International (NYSE:ATV) jumped 23 percent for the week but is just making up some ground after steep losses the week before. As a result, ATV is not overbought either.

A-Power Energy (NASDAQ:APWR) crumbled this week, unfortunately with heavy volume - suggesting strong money outflows... Risky investors might want to pick up some of it in the lat hour of trading on Friday betting on a pop up next week. China Automotive Systems (NASDAQ:CAAS) is trading well below her trading range, another stock investors might want to track closely. Overbought stocks are the most vulnerable when the market is heading south. Right now the market is heading north while there are no overbought China stocks to speak of, technically speaking. This gives room to the upside for Perfect World (NASDAQ:PWRD) and Zhongpin Inc. (NASDAQ:HOGS) for Friday.  China Architectural Engineering (NASDAQ:CAEI) is not for the faint hearted, a 50 percent swing this week might cause some of those a heart attack. Another extremely volatile China stock is Acorn International (NYSE:ATV), rendering technical indicators almost useless.

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A-Power Energy (NASDAQ:APWR) has approached theoretical lows but with heavy underlying volume. This implies the turnaround might have to wait. Nevertheless the stock is trading at extremes, something investors should be aware of.

China Automotive Systems (NASDAQ:CAAS) is another hot potaqto. This stock went from $2 to $20 in 2009, screaming off the overbought chart along the way. But a reality check kicked in in 2010 as the red hot Chinese auto sector showed signs of cooling off a bit. This stock is highly liquid and might serve trend investors well.

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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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