November 3, 2010 (Chinavestor) The 2.2% advance of the Guggenheim China Small Cap ETF on Tuesday left some small cap China stock vulnerable. American Dairy (NYSE:ADY) rose 6.4% on top of previous gains but now is trading at extremes. Another small cap to watch out for is The9 Ltd. (NASDAQ:NCTY) given the negative sector rotation effecting the entire online game industry. The overbought monitor picked up Tiens Biotech (AMEX:TBV) a day before - and the stock leveled off on Tuesday just like Acorn International (NYSE:ATV).
Stocks trading above the trading range and thus are vulnerable include Actions Semiconductor (NASDAQ:ACTS), Guangshen Rail (NYSE:GSH), besides 3Sbio (NASDAQ:SSRX), China Natural resources (NASDAQ:CHNR) and Spreadtrum Communications, Inc. (NASDAQ:SPRD).
Oversold stocks with a situation include VisionChina Media (NASDAQ:VISN) and China Digital TV Holding Co., Ltd. (NYSE:STV).
But the devil is always in the details. Actions Semiconductor (NASDAQ:ACTS) just reported third quarter financials with revenues below previous quarter or down YoY. Bad news - the stock is down already after-market. Vulnerable position and disappointing financials - bad combination!
Guangshen Rail (NYSE:GSH) is a large cap railway operator in China's economic heartland - and thus is much more resilient than its smaller cap counterparts.
Spreadtrum Communications (NASDAQ:SPRD) rose 9.86% on strong technological / fundamental news. Despite the surge on Tuesday, more of the same is possible on Wednesday - according to the overbought chart.
Investors were not impressed by VisionChina Media (NASDAQ:VISN) sending the stock on a slide. While net loss narrowed for the quarter, the company is still in the red - not a pretty sight.
China Digital TV Holding Co., Ltd. (NYSE:STV) has been on the slide since October 15 but may not be out of the woods yet - according to the oversold monitor below. The stock hasn't reached theoretical lows yet.
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.