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China stock Xtremes on the rise as October ends

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warning1 October 29, 2010 (Chinavestor) The number of Chinese stocks trading at extremes rose sharply on Thursday as selected small cap stocks popped. China Grentech Corp. Ltd. (NASDAQ:GRRF) surged 65% and became overbought. While smaller in percentage points, similarly unusual move was observed at China Natural Resources Inc. (NASDAQ:CHNR),  BMP Sunstone corp. (NASDAQ:BJGP) and at 3SBio Inc. (NASDAQ:SSRX) to a lesser degree. Even a relatively small change sent China Sky One Medical (NASDAQ:CSKI) right at to theoretical highs, suggesting the stock will most likely level off.  Along with the increase of overbought stocks, the number of oversold ones is one the rise as well. The sell-off continues for GigaMedia Limited (NASDAQ:GIGM) while Simcere Pharma (NYSE:SCR) just fell off the cliff on Thursday. Despite serious losses, these stocks hasn't established a bottom according to the oversold chart.

 

Back to the overbought extremes.  Sleepy China Grentech Corp. Ltd. (NASDAQ:GRRF) was that "special situation stock" on Thursday after winning significant bids with China Mobile (NYSE:CHL). Volume was fifty times average, suggesting strong money flows may be able to keep the stock rolling. Despite an unusual surge, the stock hasn't reached theoretical highs yet, suggesting more upside is possible for China Grentech Corp. Ltd. (NASDAQ:GRRF).

China Natural Resources Inc. (NASDAQ:CHNR) is closer to theoretical highs than China GrenTech (NASDAQ:GRRF) though it only registered a 15% rise in the past five days. Nevertheless downside risk exceeds upside potential for this low volume China play.

A straight 25% jump right after noon sent BMP Sunstone corp. (NASDAQ:BJGP) over the board. Needless to say the stock is overbought. It is important to remember that overbought is not necessarily bearish. It just suggests that the stock has risen too fast, too much, and a technical correction is the most likely scenario for the short term.

3SBio Inc. (NASDAQ:SSRX) had a strong month is October with some acceleration at the end. The overbought monitor caught this unusual move. While more upside is possible, downside risk is clearly on the rise.

China Sky One Medical (NASDAQ:CSKI) is trading at the high end of its trading range but is on the overbought list because the trading range itself is at extreme. This is happening when a stock breaks an unusually long loosing streak - as is the case with the stock. It's hard to say where China Sky One Medical (NASDAQ:CSKI) is going to go from here.

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GigaMedia Limited (NASDAQ:GIGM) is the most oversold china play at the moment. the stock not only fell the most in relative term but is the closest to theoretical lows. Despite significant losses, more downside is possible!

Another "don't touch it" stock is Simcere Pharma (NYSE:SCR). The stock is trading well below her normal trading range, suggesting the stock lacks support. Not a good sign for the short term.

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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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