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Oversold China plays only, Nov. 24

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sale2 November 24, 2010 (Chinavestor) Tuesday turned to be a bloodbath for Chinese ADRs as well as for most U.S. stocks. As a result, there isn't any overbought Chinese ADR at the moment, technically speaking. But the oversold end of the China ADR universe is full of action. CNinsure (NASDAQ:CISG) and NetEase.com Inc. (NASDAQ:NTES) may have declined the most in relative terms but are far from oversold. Harbin Electric (NASDAQ:HRBN) is trading the closest to theoretical lows but the worst might not be over yet. E-House Holdings (NYSE:EJ) remains under water but the prominent position of China Mobile (NYSE:CHL) comes as a surprise. Wonder Auto Technology (NASDAQ:WATG) reported in-line but fell along the sector suggesting more downside is possible unless market sentiment flips.

CNinsure (NASDAQ:CISG) fell 19% with huge volume, a very bad combination for any stock. Despite recent losses more downside is possible, according to the oversold chart below.  CNinsure (NASDAQ:CISG) is similar to NetEase.com Inc. (NASDAQ:NTES) as both stocks are trading far from theoretical lows despite significant declines.Talking about NetEase.com inc. (NASDAQ:NTES). The stock fell a relatively modest 2.05% but that's highly unusual for an industry leader like NetEase.com Inc. (NASDAQ:NTES). NetEase.com Inc. (NASDAQ:NTES) overtook Shanda Interactive (NASDAQ:SNDA) in 2008 as the largest online game operator in terms of revenues and profits.

Another industry leader on the oversold board is China Mobile (NYSE:CHL). China's largest mobile operator fell a relatively dismal 1.37% but fell below the $50 mark and has approached theoretical lows. The stock is probably near the bottom, suggests the oversold chart.

But the situation may be different for Chinese power generators. Both Harbin Electric (NASDAQ:HRBN) and Huaneng Power (NYSE:HNP) made it to the most oversold Chine stock list for today. The sector feels a pinch stemming from high coal price to absence of tariffs increase. With these factors not going anywhere, the power generating sector may continue to show softness.

Wonder Auto Technology (NASDAQ:WATG) reported just after AutoChina International (NASDAQ:AUTC) underlying the fundamental weakness of the sector. Wonder Auto Technology (NASDAQ:WATG) guided in-line with expectations but AutoChina International (NASDAQ:AUTC) disappointed. All said, more downside is possible for both stocks.

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With such a broad sell-off this week, there is no overbought China stock to speak of. All previously overbought China plays fell on Tuesday leaving momentum stock seekers out in the dark.

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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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