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Overbought monitor separating darling from dogs

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buy_sell_2 September 22, 2010 (Chinavestor) China stock investors have to increasingly pay attention to the market as the number of overbought China stocks is on the rise. Sohu.com (NASDAQ:SOHU) is in par with Sina Corp. (NASDAQ:SINA) after a 7.1 percent advance on Tuesday. Harbin Electric (NASDAQ:HRBN) jumped 9 percent for the week but is trading at extremes right now. China Real Estate Information Corporation (NASDAQ:CRIC) is another China play to watch closely. Large cap China Petroleum & Chemical Corp. (NYSE:SNP) is trading way above where companies her size normally go, sign of a possible short term correction. New Oriental Education (NYSE:EDU) is one of the best stocks in its field, but new 52 week high is in danger after latest surge.

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. With that in mind, industry leaders like New Oriental Education (NYSE:EDU) don't crumble but might level off for some time.

China Petroleum & Chemical Corp. (NYSE:SNP)is Asia's largest oil refiner by volume, another solid stock that is expected to keep leveling off after a plateau on Tuesday.

Sohu.com (NASDAQ:SOHU) is a prominent Internet play, along with Tencent Holdings (HKG:0700) and Sina Corp. (NASDAQ:SINA). Latest surge is partially due to stock rotation where investors exit smaller cap, more risky names in favor of established ones. But the latest advance for both Sina Corp. (NASDAQ:SINA) and Sohu.com (NASDAQ:SOHU) looks to be excessive, suggesting both stocks need a breather right now.

Harbin Electric (NASDAQ:HRBN) seems to be reacting to the tariffs increase, announced earlier this month, when larger cap Huaneng Power (NYSE:HNP) and Hong Kong listed Datang Power (HKG:0991) went through the roof. But current sudden two days advance puts the stock on the defensive and might have to digest what has just happened.

Now that risk of a doube dip is easing, oversold real estate stocks took off. China Real Estate Information Corporation (NASDAQ:CRIC) advanced 28.93 percent since last Wednesday and is of course over the edge. The good news is that the stock is far from theoretical highs, suggesting more upside is possible, albeit at a slower pace.

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The oversold end of the Chinqa stock universe is relatively uneventful; list of the most oversold stocks is below for review.

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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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