December 31, 2010 (Chinavestor) The number of China stocks trading at extremes is on the rise according to the overbought chart below. The overbought monitor caught the sudden surge of China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF), China Precision Steel, Inc. (NASDAQ:CPSL), Sutor Technology Group Ltd. (NASDAQ:SUTR), Qiao Xing Universal Resources, Inc. (NASDAQ:XING) and Chinacast Education Corporation (NASDAQ:CAST). But investors have to consider that all these small cap stocks lack long term support unless the broad market catches fire.Latest gains seem elusive right now unless the market moves higher.
There isn't much change on the oversold end of the China stock universe from yesterday. Baidu.com Inc. (NASDAQ:BIDU) remains oversold and might pop, according to the oversold monitor. The rest of the stocks have been trading in a narrow range, giving no indication of future price movements.
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.