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China stock watch list, October 8, 2010

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telescope1 October 8, 2010 (Chinavestor) There isn't much change on the overbought monitor from yesterday; except for Gushan Environmental Energy (NYSE:GU), a Chinese bio-diesel oil producer. Zhongpin Inc. (NASDAQ:HOGS) continued to advance while most overbought China plays have hit resistance. China Precision Steel Inc. (NASDAQ:CPSL) is showing up on the oversold monitor but despite a 17% drop in the past five days, more downside is possible. Unusual move on Thursday belongs to China Hydroelectric Corp. (NYSE:CHC), an operator of sixteen and counting small dams in China.

 

We noted in the October Newsletter that oversold Gushan Environmental Energy (NYSE:GU) and China Integrated Energy (NASDAQ:CBEH) are going to make a move in early October. While energy prices and oil in particular rose above $80/barrel, bio-diesel producers failed to gain traction. Despite latest surge, Gushan Environmental Energy (NYSE:GU) is safe, according to the overbought monitor below.

Ata Inc. (NASDAQ:ATAI) and KongZhong Corp. (NASDAQ:KONG) are trading above their trading range and are considered overbought. But low volume for both stocks render technical indicators less useful.

Zhongpin Inc. (NASDAQ:HOGS) is looking better on the overbought chart below. The stock hasn't reached theoretical highs yet suggesting more upside is still possible.

Xinyuan Real Estate (NYSE:XIN) is looking good after taking a break on Thursday. The stock took a breather and might resume heading north, based on the chart below.

OB_2010108

China Precision Steel Inc. (NASDAQ:CPSL) hasn't reached theoretical lows yet, suggesting the stock is not out of the danger zone just yet. New Oriental Education (NYSE:EDU) has started to bottom out, but may go either direction from here. 

OS_2010108

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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