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Volatility is back for China stocks, Dec 8

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risk_1 November 8, 2010 (Chinavestor) Chindex International (NASDAQ:CHDX) is the most overbought China stock this morning but the fall is not necessarily imminent, according to the following chart. Stocks with sizable momentum include Origin Agritech Ltd. (NASDAQ:SEED) from the food industry but Global Sources (NASDAQ:GSOL), and Suntech Power (NYSE:STP) are stocks of interest as well.

Home Inns & Hotels Management (NASDAQ:HMIN) is trading the closest to theoretical lows but it's Longtop Financial Technologies Limited (NYSE:LFT) that suffered the heaviest blow when it comes to trading characteristics. CNinsure (NASDAQ:CISG) fell way below its trading range as well as CDC Corporation (NASDAQ:CHINA).

Let's take a look at overbought China stocks first. Origin Agritech Ltd. (NASDAQ:SEED)is a developing story where the stock has more upside, according to the overbought chart below. But Suntech Power (NYSE:STP) may have well plateaued yesterday and may continue to fall as oil pricesĀ  due to a stronger dollar.

Global Sources (NASDAQ:GSOL) has been on the roll and the good news is that upside is not limited by technical indicators yet.

OB_2010128

Home Inns & Hotels Management (NASDAQ:HMIN) is back to square one, and is trading where it did before reporting sound earnings announcement.This is a value stock that investors may want to buy on the cheap.

Longtop Financial Technologies Limited (NYSE:LFT) didn't fall that hard in percentage points but the 7.5% dive for the week is highly unusual. The stock is expected to stabilize somewhere around here for the short term.

Unusually large volume and increased volatility for CNinsure (NASDAQ:CISG) suggests something is cooking in here. This is a high risk high return situation, where investors have to have a strong stomach.

CDC Corporation (NASDAQ:CHINA) fell 20% in just three days... but more downside is possible, according to the oversold chart below.

OS_2010128

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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