As far as the first chart, the most overbought China ADR list, is concerned the first observation we have is that there is not a single overbought China stock technically speaking. Simcere Pharmaceutical Group (NYSE:SCR) has been leveling off after the rally last week. This may just be the breather we predicted readying the stock for more upside.
Another formerly overbought stocks is China Infrastructure Investment Corp. (NASDAQ:CIIC). The company fell 5.8% yesterday making it less extreme but the size of the arrow suggests the correction may not be over.
Harbin Electric, Inc. (NASDAQ:HRBN) fall over 5% yesterday and is off over 10% since last Thursday but that may not be the end of the fall, according to the oversold screen below. Despite these losses the stock hasn't reached it bottom suggests the chart below.
Chinese solar stock fell hard after Suntech Power (NYSE:STP) missed estimates earlier the week. But the over 20% correction for Solarfun Power Holdings (NASDAQ:SOLF) looks excessive and the sudden drop for JA Solar (NASDAQ:JASO) doesn't look right either. Trina Solar (NASDAQ:TSL) is back in the lower $20s from the $30 range and is tradingd way below its normal trading range. While the stock hans't approached theoretical lows yet, upside potential looks exceeding downside risk at this point.
General Steel (NYSE:GSI) stepped out of its trading range and suggests the correction may be overdone. The stock looks similar to GigaMedia Limited (NASDAQ:GIGM) from an oversold point of view.
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.