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China stock extremes to watch on September 28

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telescope1 September 28, 2010 (Chinavestor) Strong money flows send highly liquid, quality China stocks over the edge on Monday. Ctrip.com International (NASDAQ:CTRP), a leading Chinese online travel site, approached theoretical highs and is susceptible for a correction. Search engine giant, Baidu.com (NASDAQ:BIDU) broke thought the $100 barrier and is trading at all time high. Unusual surge of Yanzhou Coal Mining (NYSE:YZC) is another reason for concern but it is Tongxin International (NASDAQ:TXIC), a small cap commercial vehicle body maker, that is considered the highest risk at this point. AirMedia Group (NASDAQ:AMCN) surged 18.7 percent and is stretching too thin, according to the overbought monitor below.

Education stocks suffered; New Oriental Education & Technology Group (NYSE:EDU) continued to slide but outlook is not too promising for ChinaEdu Corp. (NASDAQ:CEDU) either.

Ctrip.com International (NASDAQ:CTRP) rose 3.5 percent on Monday and is up 10 percent just in three days. Part of the surge is explained by investors hedging risk by rotating into highly liquid, quality, larger Chinese stocks. Ctrip.com Int. (NASDAQ:CTRP) is one of them.

Another highly visible NASDAQ play is Baidu.com (NASDAQ:BIDU). This stock benetiffted from risk reshuffling as well. The stock broke through $100 level first time sinnce the 10-to-1 split earlier the year and is trading at all time highs. While more upside is possible, may be for Tuesday, short term outlook is more flat.

Yanzhou Coal Mining (NYSE:YZC), the third largest Chinese coal miner, is trading too close to theoretical highs. This in turn suggests a correction is coming...

Tongxin International (NASDAQ:TXIC) is like Rino International (NASDAQ:RINO). Both are smaller cap NASDAQ plays that have been very volatile in the past. While RINO is not on the overbought screen yet, the unusual advance in the past three trading days suggests Tongxin International (NASDAQ:TXIC) may hit a roadblock soon. It may be temporary, but the overbought monitor says it's there.

AirMedia Group (NASDAQ:AMCN)jumped over 18 percent followed closely by A-Power Energy Generation Systems, Ltd. (NASDAQ:APWR). Both stocks are looking vulnerable, according to the overbought monitor below.

OB_2010928

New Oriental Education & Technology Group (NYSE:EDU)is the most interesting stock on the oversold monitor this morning. The sudden loss calls for a correction, at least a slow down, according to the oversold monitor below. While the stock hasn't reached theoretical lows yet, the unusual, sudden drop suggests the stock will establish a short term bottom near $93.

OS_2010928

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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