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Oversold stocks ready to bounce back, Nov. 18

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advance7 November 18, 2010 (Chinavestor) China Infrastructure Investment Corp. (NASDAQ:CIIC) jumped 25% out of the blue but became overbought. City Telecom H.K. (NASDAQ:CTEL) advanced 3.9% and remained overbought as well. But most of the action took place on the oversold end of the China stock universe as solar stocks tumbled on Wednesday. Investors sold off the sector after Suntech Power (NYSE:STP) missed earnings estimates. Trina Solar (NYSE:TSL) and JA Solar (NASDAQ:JASO) fell the hardest following the news but Yingli Green Energy (NYSE:YGE) is on the oversold monitor as well. China Telecom (NYSE:CHA), China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) have been hard hit as well, according to the oversold monitor.

 

China Infrastructure Investment Corp. (NASDAQ:CIIC) jumped over 25% on Wednesday with volume ten times over average, but is dangerously overbought and is ripe for leveling off. City Telecom (NASDAQ:CTEL) advanced too much, too fast - but is far from theoretical highs. After taking a break earlier this week, the stock may resume a rally. But this concludes the overbought end of the China stock universe, only a handful Chinese stocks are actually up for the past five trading days.

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While action on the overbought monitor is limited, the same is not true for the oversold one. China Telecom (NYSE:CHA) is the closest to theoretical lows, suggesting the stock is ready to level off from here. But weakness is not limited to China Telecom (NYSE:CHA). China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) fell below their normal trading range as well, though they're far from theoretical lows. More downside is possible should Asian markets continue to show weakness.

Chinese solar stock suffered the heaviest blows on Wednesday, according to the oversold monitor below. Suntech Power (NYSE:STP)  fell 9% after missing consensus estimates. Rival Trina Solar (NYSE:TSL) fell half of that on Wednesday but is off over 7% for the week and is considered oversold. JA Solar (NASDAQ:JASO) is off 14.5% for the week already and is oversold as well. another solar stock from the oversold screen, Yingli Green Energy (NYSE:YGE), is holding on relatively well and is ready to bounce back should market sentiment improve.

More downside is possible for E-House Holdings (NYSE:EJ) despite recent losses while Rino International (NASDAQ:RINO) fell too hard according to the oversold monitor.

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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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