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China stock extremes for December 20

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telescope1 December 20, 2010 (Chinavestor) Cogo Group Inc. (NASDAQ:COGO) and China-Biotics Inc. (NASDAQ:CHBT) may be the most overbought China stock to watch out for, but Baidu.com Inc. (NASDAQ:BIDU) and Telestone Technologies (NASDAQ:TSTC) may be two stocks that will be worth paying attention to on Monday. The education sector is back with two prominent components such as New Oriental Education & Tech. Group Inc (NYSE:EDU) and Noah Education Holdings Ltd. (NYSE:NED) but highly liquid Melco Crown Entertainment Ltd (NASDAQ:MPEL) may be a nice surprise for the day...

Looking at the most overbought China ADR list below, Cogo Group Inc. (NASDAQ:COGO) remains in the danger zone from Friday. This is suggesting that downside risk still exceeds upside potential for the short term.

China-Biotics Inc. (NASDAQ:CHBT) had a great day last Friday and may extend it to a few more day, according to the overbought chart below. The stock is still far from theoretical highs, a very positive sign when it comes to upside potential.

The education sector is a little tricky. While New Oriental Education & Tech. Group Inc (NYSE:EDU) and Noah Education Holdings Ltd. (NYSE:NED) may look similar on the overbought screen below, investors have to consider the huge different in volume for the two. New Oriental Education & Tech. Group Inc (NYSE:EDU) is the one that's more likely to extend gains from last week. But low volume renders technical indicators useless for stocks like Noah Education Holdings Ltd. (NYSE:NED).

Melco Crown Entertainment Ltd (NASDAQ:MPEL)is an explosive, momentum stock that may well continue to head north. The stock is still trading within its normal trading range, suggesting more upside is a real possibility. 

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Baidu.com Inc. (NASDAQ:BIDU) fell too har,d too much and is ready for a bounce back, suggests the oversold monitor. China's largest search engine company doesn't get oversold too often and certainly not to a point where it is right now.

Telestone Technologies (NASDAQ:TSTC) has been trading in a narrow range lately. But if rumors are right - something we have just received via an unconfirmed email - something is cooking for the company. According to this source, " Telestone Technologies (NASDAQ:TSTC) and its agent Quell were awarded a new contract last week for 3 more buildings in the same complex, and for the same hospital, as the earlier projects announced in July. They are also working on several other contracts in the Houston area and new large contracts are expected in this quarter. " I urge investors to call quellcorp.com to verify. They might also provide the primary representative for the hospital to further verification.

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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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