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China stock extremes for Dec. 13

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watch_5 December 13, 2010 (Chinavestor) Origin Agritech (NASDAQ:SEED) is where Sina Corp. (NASDAQ:SINA) was last Friday morning before leveling off. Chindex International (NASDAQ:CHDX) is another stock in the danger zone  like Global Sources (NASDAQ:GSOL), trading way above its trading envelope. Telestone Technologies (NASDAQ:TSTC) may trade the closest to theoretical lows but its Home Inns & Hotel Management (NASDAQ:HMIN), China Eastern Airlines (NYSE:CEA) and NetEase.com Inc. (NASDAQ:NTES) that has the highest chances to make a comeback. Chinacast Education Corporation (NASDAQ:CAST) looks to fell off the bottom but is not necessarily off the woods yet.

Taking a closer look at the overbought monitor, Origin Agritech (NASDAQ:SEED) looks to be in a tight spot. The stock has approached theoretical highs suggesting the stock may level off before resuming the rally. Just like Sina Corp. (NASDAQ:SINA) last Friday. Talking about Sina Corp. (NASDAQ:SINA). This stock has momentum and may resume the rally on Monday.

Chindex International (NASDAQ:CHDX) has been on a roll since middle of November. But it stepped way out of its trading envelope suggesting downside risk now exceeds upside potential. The same is true for Global Sources (NASDAQ:GSOL) thought to a lesser degree.

OB_20101213

Looking at oversold China stocks, Home Inns & Hotel Management (NASDAQ:HMIN) and China Eastern Airlines (NYSE:CEA) look ready to bounce back. Both stocks have suffered last week reaching a point where upside potential is greater that downside risk. Weakness is nit limited to China Eastern Airlines (NYSE:CEA); larger rival China Southern Airlines (NYSE:ZNH) looks ready for a comeback as well.

Another fundamentally sound company, NetEase.com Inc. (NASDAQ:NTES) is worth taking a second look. The stock isn't oversold to the extremes but is likely to benefit from overall market momentum.

Chinacast Education Corporation (NASDAQ:CAST) fell a modest 3.7% last week yet it looks more severe on the oversold monitor below. That's because the stock has been trading in a narrow trading range where a 3.7% drop makes a huge difference. While the fall is unusual, the stock hasn't reached theoretical lows yet suggesting more downside is possible.

OS_20101213

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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