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Overbought food stocks to watch on October 13

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warning2 October 13, 2010 (Chinavestor) As the Dow hangs on to the 11,000 status, the number of overbought China stocks is on the rise. Vulnerable stocks off the bat include Ata Inc. (NASDAQ:ATAI), AgFeed Industries (NASDAQ:FEED) and Fushi Copperweld (NASDAQ:FSIN). But Origin Agritech (NASDAQ:SEED) is just as overbought as Guangshen Rail (NYSE:GSH), according to the overbought chart.  Another set of stocks include WSP Holdings Limited (NYSE:WH), Fuqi International (NASDAQ:FUQI), Yucheng Technologies Ltd. (NASDAQ:YTEC) and China Architectural Engineering, Inc. (NASDAQ:CAEI). These stocks have just stepped out of their trading envelope but may not go any further, or at least their mid term outlook is uncertain.

 

Certain food stocks continue to trade at extremes and call for attention. AgFeed Industries (NASDAQ:FEED) and Origin Agritech (NASDAQ:SEED) move in tandem more often than not, suggesting a fall for one may trigger a fall for the other. Both are overbought and are in danger.

Guangshen Rail (NYSE:GSH) is up six days in a row and might be ripe for a correction. But overbought is not necessarily bearish. It merely suggests that the stock may have risen too much, too fast and might take a break.

WSP Holdings Ltd. (NYSE:WH) advanced 18 percent in the last five days and might be ready to take a breath. Fuqi International (NASDAQ:FUQI) rose 21 percent and started to level off on Tuesday, similarly to WSP Holdings (NYSE:WH). One big trade sent Yucheng Technologies Ltd. (NASDAQ:YTEC) soaring on Monday but started to give back some of it on Tuesday. Outlook is uncertain with a negative bias, according to the overbought monitor.

Investors wonder where the ceiling may be for China Architectural Engineering, Inc. (NASDAQ:CAEI). The stock advanced 36 percent just in five days and is now overbought.

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There is not a single oversold China ADR from a technical point of view. Telestone Technologies (NASDAQ:TSTC) has lot of upside, should it fire up the rockets like it did exactly one year ago.

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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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