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China Stocks for Bargain Hunting

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forecast1 December 9, 2010 (Chinavestor) With not much change on the overbought end of the China stock universe from yesterday, investors have to look at the oversold chart to find stock extremes.

Home Inns & Hotels Management (NASDAQ:HMIN) leads the oversold China stock list at the moment but large cap China Eastern Airlines (NYSE:CEA) and China Unicom (NYSE:CHU) look ready to bounce back as well on of these days. Less liquid UTSarcom (NASDAQ:UTSI) lost 9% for the week already, suggesting the bottom is near.  Changyou.com Inc. (NASDAQ:CYOU) is another stock ripe for bottom fishing.

But here is the trick; not all oversold China stocks are going to bounce right back up. China Eastern Airlines (NYSE:CEA) and the rest of the sector fell the hardest in Hong Kong earlier today, suggesting the stock is gong to be a good buy at the end of the market day.

But outlook is good for Home Inns & Hotels Management (NASDAQ:HMIN) and China Unicom (NYSE:CHU) right after the open. China's second largest mobile carrier had a strong showing in Asia earlier today, suggesting Thursday is gong to be a positive day for the ADR as well.

UTSarcom (NASDAQ:UTSI) is a question mark at this point. While the stock fell hard lately, low volume renders the oversold indicator useless.

Value investors want to look into Changyou.com Inc. (NASDAQ:CYOU) right now. The stock isn't oversold to the extremes but reported more than solid financials and is trading at a low 4.5 times earrings!

OS_2010129

There isn't much change on the overbought end of the China stock list this morning. Chindex International (NASDAQ:CHDX) and Origin Agritech (NASDAQ:SEED) continue to show momentum and with a positive market day, both stocks may well extend their gains. The same statement is true for the rest of the overbought China ADR universe.

OB_2010129

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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