November 22, 2010 (Chinavestor) Small cap, low volume China stocks lead the overbought monitor this morning. Actions Semiconductor Co., Ltd. (NASDAQ:ACTS) and Linktone Ltd. (NASDAQ:LTON) jumped on one huge uptick but real volume is still missing. ChinaEdu Corporation (ADR) (NASDAQ:CEDU) rose on sound earnings, completing the overbought part of the China ADR universe.
Most of the acton took place among oversold China stocks. The whole solar sector is oversold with ReneSola Ltd. (NYSE:SOL) taking the lead. Stocks with the biggest decline in relative terms include China Fire & Security Group (NASDAQ:CFSG), NetEase.com Inc. (NASDAQ:NTES) and Suntech Power (NYSE:STP). With index futures pointing to a higher open, these stocks are most like going to pare losses from last week. China Mobile (NYSE:CHL) is set to rise but outlook is dimmer for E-House Holdings (NYSE:EJ).
Details: Actions Semiconductor Co., Ltd. (NASDAQ:ACTS) has reached theoretical highs thanks to a huge uptick last Friday. The stock looks similar to Linktone Ltd. (NASDAQ:LTON) on the overbought screen below. A sound market day may help them stay overbought but downside risk is certainly on the rise. ChinaEdu Corporation (ADR) (NASDAQ:CEDU)is different for a number of reasons. The stock have been creeping higher for days to reach the overbought position; plus the stock is advancing on fundamental strength. The company reported quarterly earnings beating expectations, suggesting more upside is on the road ahead.
We published an article why Chinese solars can't get love lately. Seven Chinese solar stocks are on the oversold screen this morning. ReneSola Ltd. (NYSE:SOL) is on top of the list but JA Solar (NASDAQ:JASO), Solarfun Power Holdings (NASDAQ:SOLF), Trina Solar (NYSE:TSL) is just as a developing story. Suntech Power (NYSE:STP) fell unusually hard and presents a bounce back opportunity. China Fire & Security Group (NASDAQ:CFSG) has been eroding since reporting quarterly financials. More downside is possible, investors!
NetEase.com Inc. (NASDAQ:NTES) is another turn around opportunity. The stock fell hard but is still within its normal trading range. But outlook is different for E-House Holdings (NYSE:EJ).The rise of bank reserve ration in China punished financial and real estate stocks in Shanghai earlier this morning. Chances are that EJ will suffer on Monday.
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.