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China stock extremes to watch, Dec. 3

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warning1 December 3, 2010 (Chinavestor) Two strong market days made the overbought China stocks list all that interesting. Vanceinfo Technologies (NYSE:VIT) is closest to theoretical highs but its Ku6 Media Co. (NASDAQ:KUTV) and Chindex International, Inc (NASDAQ:CHDX) that's in the danger zone. Oversold stocks of interest include eLong Inc. (NASDAQ:LONG), A-Power Energy Generation Systems (NASDAQ:APWR) and  CNinsure Inc. (NASDAQ:CISG).

Investors may wonder where the ceiling for Vanceinfo Technologies (NYSE:VIT) may be. The stock has approached theoretical highs but a good market day on Friday can keep it go higher.

Ku6 Media co. (NASDAQ:KUTV) surged 33% on Thursday and 58% since last Wednesday... The run is obviously too much, too fast, suggesting upside is limited.

OB_2010123

 

Chinese solar stocks continue to top the oversold list, but eLong Inc. (NASDAQ:LONG) is a developing story. The stock lost 20% since last Thursday and is trading now at the low end of its trading envelope. More downside is possible, suggests the oversold chart.

A-Power Energy Generation Systems (NASDAQ:APWR) was hit hard on Wednesday as the company disappointed investors with a weak Q3. While the 25% fall might seem excessive to many, more downside is possible for the stock according to the chart below.

CNinsure Inc. (NASDAQ:CISG) is another stock that fell following Q3 numbers. Again, more downside is possible despite sizable fall on Thursday.

OS_2010123

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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