American Dairy Inc. (NYSE:ADY) advanced 24% in the last five trading days alone, making investors wonder where the ceiling may just be. The overbought indicator suggests the stock is dangerously overbought, downside risk far exceeding upside potential.
Sleepy Puda Coal (NASDAQ:PUDA) jumped 13.84% on Wednesday following news that the company will acquire additional mines. Significant underlying volume suggests there is sufficient buying power behind the stock to keep it from falling for the short time.
Guangshen Rail (NYSE:GSH) is looking good on the overbought chart below; the advance has been gradual and hasn't reached theoretical highs yet.
This is different from ChinaEdu Corporation (NASDAQ:CEDU), a stock that was trading literally flat for most of October. Even a small gain of under 5% in the past three days suggest the stock is overbought...
The online game sector got some of its mojo back on Wednesday helping The9 Ltd. (NASDAQ:NCTY) to keep up with its rapid advance. But investors better exercise caution with this stock, according to the overbought chart below.
Fushi Copperweld (NASDAQ:FSIN) jumped 15.8% with significant underlying volume yesterday. Despite a significant move the stoc doesn't look overbought all that much.
China Integrated Energy (NASDAQ:CBEH) advanced rapidly on Wednesday. The good news is that the stock isn't overbought yet suggesting more upside is possible.
Despite some occasional losses, there is not a single Chinese ADR that's technically overbought. More downside is possible for GigaMedia Limited (NASDAQ:GIGM) or for Telestone Technologies (NASDAQ:TSTC).
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.