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Overbought stocks take a break, Oct. 27

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percent October 26, 2010 (Chinavestor) Almost every overbought stocks took a breather on Tuesday but China Yuchai International Limited (NYSE:CYD). Sohu.com (NASDAQ:SOHU) and Changyou.com (NASDAQ:CYOU) fell 1.47% and 6.36%, respectively while China Housing & Land Development, Inc. (NASDAQ:CHLN) shed 1.59%. Latest advance of NetEase.com Inc. (NASDAQ:NTES) is unusual, calling for attention - along with under the radar Shanda Games (NASDAQ:GAME).

China Green Agriculture (NYSE:CGA) continued to fell but is approaching the bottom, according to the oversold chart. But the bottom is not that near for Huaneng Power Int. (NYSE:HNP) or E-House Holdings (NYSE:EJ), despite recent losses.

China Yuchai International Limited (NYSE:CYD) is the most overbought China play at the moment, looking similar to Sohu.com (NASDAQ:SOHU) a day before. The stock has reached theoretical high and is susceptible for profit taking.

Robust earnings flew Sohu.com Inc. (NASDAQ:SOHU) on Monday but the stock succumbed to profit taking on Tuesday. Changyou.com (NASDAQ:CYOU), formerly Sohu's online game unit but now independent, fell hard on Tuesday sobering up after a large jump on Monday. Sohu.com Inc. (NASDAQ:SOHU) is looking vulnerable despite recent pull-back.

China Housing & Land Development, Inc. (NASDAQ:CHLN) pulled back on Tuesday, as expected, but is looking vulnerable still. The stock may continue to rally but that needs a strong underlying market. This is a high risk / high return situation with emphasis on risk.

Chinese online stocks have been mixed lately. NetEase.com Inc. (NASDAQ:NTES) and Shanda Games (NASDAQ:GAME) are on fire but Changyou.com (NASDAQ:CYOU) remains volatile despite low valuation. More upside is possible for industry leaders, according to the overbought chart.

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China Green Agriculture (NYSE:CGA) hasn't been able to loosen the grip of bad news just yet. But with a 23% tumble in just five days, value investors may find a gem - especially should allegations prove wrong.

Huaneng Power International (NYSE:HNP)hasn't approached theoretical lows yet and is looking vulnerable for more downside, despite recent losses.

E-House Holdings (NYSE:EJ) is looking very similar to Huaneng Power Int. (NYSE:HNP) from a technical point of view. Both stocks are just below their trading envelope, suggesting more downside is possible - though not necessary!

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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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