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China stock extremes on September 10

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warning2 September 10, 2010 (Chinavestor) China stocks at extremes include China Bak Battery (NASDAQ:CBAK), WSP Holdings (NYSE:WH) from earlier the week while Ku6 Media Co. Ltd. (NASDAQ:KUTV) fell as expected on Thursday. Short term upside is near for Home Inns & Hotels Management (NASDAQ:HMIN) as well.

There are some new developments on the oversold end of the China stock universe, notably Fuqi International (NASDAQ:FUQI) after a 24 percent drop on Thursday. China Mobile (NYSE:CHL) is oversold given her size and trading characteristics but downside is not limited for China Biotics (NASDAQ:CHBT) and China Sky One Media (NASDAQ:CSKI).

Back to the overbought indicator: China Bak Battery (NASDAQ:CBAK) has reached theoretical highs and has been leveling off for the past two days.

Upside looks limited for WSP Holdings (NYSE:WH) as well. Trading pattern of WSP Holdings is similar to CBAK - downside risk exceeding upside potential.

Home Inns & Hotels Management (NASDAQ:HMIN) is a fundamentally solid company and while it may seem overbought, chances are low that it will crumble. Leveling off is more a possibility with additional upside on the long run.

OB_2010910

FUQI International (NASDAQ:FUQI) tumbled after an SEC probe, the Wall Street Journal reported. Despite a sizeable fall on Thursday, more downside is possible - according to the oversold chart below.

China Mobile (NYSE:CHL) is the world's largest mobile carrier and as such doesn't get to the theoretical lows too often. Current situation suggests China Mobile (NYSE:CHL) is oversold and is ready to make a comeback. Vodaphone is dumping her 3.2 percent stake in CHL, one of the reasons for current technical weakness.

Despite current weakness, smaller cap China Biotics (NASDAQ:CHBT) and China Sky One Media (NASDAQ:CSKI) are in trouble- or at least more downside is possible for both stocks. Noe of them has reached theoretical lows yet, as the following chart testifies.

OS_2010910

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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