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China stock extremes on November 11

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warning3 November 11, 2010 (Chinavestor) There is no change on the top of the overbought China stock list, Shanda Interactive (NASDAQ:SNDA) is still occupying the top position. The stock is overbought and is expected to extend Wednesday's break. What's interesting are stocks that have been trading above their trading ranges for over five days - indicated by the arrow completely out of the blue horizontal bar. Longtop Financial Technologies Limited (NYSE:LFT) is the most extreme but Xinhua Finance Media Limited (NASDAQ:XSEL), Ata Inc. (NASDAQ:ATAI) and Puda Coal (NASDAQ:OUDA) are just as much in the danger zone. Sina Corp. (NASDAQ:SINA) is looking much better based on the size of the arrow while China Natural Resources Inc. (NASDAQ:CHNR) and Cogo Group (NASDAQ:COGO) are stocks with a situation.

Mindray Medical (NYSE:MR) and Rino International Co. (NASDAQ:RINO) tumbled after disappointing financials, something the oversold indicator picked up. Both stocks are trading just below the trading envelope suggesting more downside is possible despite heavy losses.

Back to the overbought screen. Longtop Financial Technologies Limited (NYSE:LFT) is ready to take a break after Wednesday's rally. The stock surged last Thursday and Friday giving room for a breather for the week, but Wedesdays' pick up sent the stock over the edge again, according to the chart below. Short term upside looks limited for the stock.

Sleepy Xinhua Finance Media Limited (NASDAQ:XSEL) has advanced over 40% since October 22, suggesting the rally is too much, too soon. Ata Inc. (NASDAQ:ATAI) is in similar shoes. A low volume stock that pops is just too much to bear. Short term upside is limited for both stocks, according to the chart below.

Puda Coal (NASDAQ:OUDA) is different from Xinhua Finance Media Limited (NASDAQ:XSEL) and Ata Inc. (NASDAQ:ATAI). The pickup is similar in magnitude but the huge underlying volume suggests real buying power is in the background.While the stock may seem overbought on the chart, and thus a breather may come, the stock is well positioned to extend its rally given strong money flows.

Sina Corp. (NASDAQ:SINA) isn't technically overbought but has momentum and is looking good. There is a lot of support behind the stock and is expected to keep on moving unless negative market sentiment steps in.

China Natural Resources Inc. (NASDAQ:CHNR) pulled back somewhat recently and is looking good again. Strong volume is a good sign here as well. The stock is away from theoretical highs and is ready to resume a rally.

Cogo Group (NASDAQ:COGO) advanced 15% in the last 30 days and is looking good, according to the chart below. The stock is just above its normal trading range leaving a lot of room to the upside.

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Two hot stocks are screaming off the oversold chart. Rino International (NASDAQ:RINO) sank from the higher end of its trading range to the lower in seconds. While the decline is sudden and may seem excessive, the truth is that the stock is just barely trading below its trading range. So there is more room left to the downside. The situation is very similar to that of Mindray Medical (NYSE:MR). The good news is that the decline may slow down but that might be just temporary before bottoming out. But investors have to consider that both of these companies are fine enterprises and it may be a good idea to pick them up in the bottom... Some food for thought.

OS_20101111

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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