September 13, 2010 (Chinavestor) Couple of new developments on the overbought and oversold China stock monitor from last week: CNOOC Ltd. (NYSE:CEO) became overbought with JA Solar (NASDAQ:JASO) showing significant improvement, but China Mobile (NYSE:CHL) is just as interesting after a significant dip last week. Outlook is good for Home Inns & Hotels Management (NASDAQ:HMIN) as well as for China Unicom (NYSE:CHU).
Given that technicals are subject to market sentiment, CNOOC Ltd. (NYSE:CEO) has more upside left to the short term, despite being the most overbought China stock today. China BAK Battery (NASDAQ:CBAK) may be able to extend latest gains on Monday. Home Inns & Hotels Management (NASDAQ:HMIN) is trading at 52 week highs but is looking good, at least on the overbought chart below. China Unicom (NYSE:CHU) did very well in Hong Kong earlier today, suggesting the stock will do good on the NYSE as well. And finally, the monitor caught the rally of JA Solar (NASDAQ:JASO) last week, suggesting more upside is possible for the stock.
China Mobile (NYSE:CHL) is the most oversold China play on Monday, suggesting a quick correction is likely to happen. While there are reasons for the slump, Vodaphone's share sale being one of them, experience has taught us that large cap NYSE listed China stocks don't get oversold to the extremes that often. This suggests CHL may experience a short term correction ASAP.
Despite significant losses, short term outlook for China Integrated (NASDAQ:CBEH) and FUQI Int. (NASDAQ:FUQI) is not looking that good.
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.