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China stock extremes to watch on November 1

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new_year2 November 1, 2010 (Chinavestor) Despite a recent pullback, a good number of Chinese stocks are trading at extremes according to the overbought monitor. China Sky One Medical, Inc (NASDAQCSKI) is trading the closes to theoretical highs followed by American Dairy Inc. (NYSE:ADY), but these low volume stocks render technical indicators useless. The overbought monitor picked up the unusual move of Acorn International (NYSE:ATV), 3SBio (NASDAQ:SSRX) and China Natural Resources (NASDAQ:CHNR), all in one group. But again, these stocks have relatively low volume. What's more telling is the developing story with Giant Interactive (NYSE:GA), AgriaCorp. (NYSE:GRO) and BMP Sunstone Corp (NASDAQ:BJGP). Interesting stocks on the oversold screen include Telestone Technologies (NASDAQ:TSTC) and China TransInfo Technology Corp. (NASDAQ:CTFO).

First and foremost: there is not a single pure overbought Chinese ADR from a technical point of view. Those trading at relative extremes include China Sky One Medical, Inc (NASDAQCSKI) and American Dairy Inc. (NYSE:ADY). But it's difficult to tell where their stock price is going to move given their low volume and vulnerability to overall market conditions.

But it's hard to miss the overall bullish sentiment surrounding the online game sector. Perfect World (NASDAQ:PWRD) and Shanda Games (NASDAQ:GAME) were all bright lately yet it's the relatively boring Giant Interactive (NYSE:GA) that made the most unusual move. The stock is trading way above her normal trading range, suggesting downside risk is on the rise!

Agria Corp. (NYSE:GRO) advanced 8.5% last week but stayed flat on Friday. So Monday is gojng to be an interesting day to see if the stock got more firepower or the hiccup ended last Thursday. looking at the overbought monitor below, more upside is possible.

BMP Sunstone Corp (NASDAQ:BJGP) jumped with huge volume last Thursday but has been flat ever since. The stock hasn't reached theoretical highs yet, suggesting a positive market day can keep it going...

OB_2010111

Telestone Technologies (NASDAQ:TSTC) is leading the oversold end of the China stock universe. The sudden fall from last Thursday brought the stock back to the top of its trading range. It may be just profit taking before earnings, suggesting the stock may go either direction from here.

China TransInfo Technology Corp. (NASDAQ:CTFO) is not the most oversold China stock at the moment but the 6% fall last week is one of the most extreme given the sleepy nature of the stock. A little bump up on Friday may just be temporary tough, given the position of current stock price relative to theoretical lows.

OS_2010111

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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