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Overbought China stocks hit resistance on September 24

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bear_1 September 24, 2010 (Chinavestor) Once hot Gushan Environmental Energy (NYSE:GU) surprised investors for the week, shooting to the top of the most overbought China stock list. Sohu.com (NASDAQ:SOHU) looks similar to Longtop Financial Technologies (NYSE:LFT) and China Real Estate Information (NASDAQ:CRIC) - these stocks have reached a crescent. Value investors switched to household names like Baidu.com (NASDAQ:BIDU) or industry leader Ctrip.com (NASDAQ:CTRP), looking for safety. China Precision Steel, Inc. (NASDAQ:CPSL) hit resistance on Thursday, just as expected.

China Integrated Energy (NASDAQ:CBEH) was the most oversold China stock earlier this week but has started to bottom out - just as the oversold indicator suggested. "China Integrated Energy (NASDAQ:CBEH) is nearing the bottom." - China stock extremes: overbought list on September 23. Gushan Environmental Energy (NYSE:GU) is another bio-diesel producer and has turned around. The stock jumped 28 percent for the week so far but will have to slow down - according to the overbought chart below. The advance from $.63 to $.81 in just three days suggest the stock will have to take a break now.

Quality, larger cap internet stocks like Sohu.com (NASDAQ:SOHU) and search engine giant Baidu.com (NASDAQ:BIDU) have advanced ten percent since Friday, but are getting too close to theoretical highs - suggesting the rally may come to a temporary halt.

China Real Estate Information Corporation (NASDAQ:CRIC) did just that, exactly as predicted using the overbought indicator. Longtop Financial (NYSE:LFT) is expected to follow suit...

We highlighted the overbought position of China Precision Steel, Inc. (NASDAQ:CPSL) yesterday, saying that "the sudden jump looks just too much, too fast; according to the overbought indicator below." China stock extremes: overbought list on September 23. Current stock price suggests downside risk exceeds upside potential for CPSL.

Ctrip.com International (NASDAQ:CTRP) is a stock that may come handy when markets get nervous. A large cap NASDAQ listing is considered a safe heaven by many, just like BIDU or Sohu.com (NASDAQ:SOHU). Current position looks good, more upside is possible.

 

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China Integrated Energy (NASDAQ:CBEH) move away from the most oversold position. Rino International (NASDAQ:RINO) is bleeding on money outflows but may turn around as soon as markets find a positive direction. Risky investors may consider entering into RINO and other explosive stocks at a discount.

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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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