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China solars rule overbought screen in Jan

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solar_5 January 25, 2011 (Chinavestor) Chinese solars continue to shine, according to the overbought chart below. Solarfun Power Holdings (NASDAQ:SOLF) and Trina Solar (NYSE:TSL) are on top of the leader-board with China CD Plastics (NASDAQ:CXDC). To highlight the strength of the solar sector, investors have to consider that besides SOLF and TSL, Yingli Green Energy (NYSE:YGE), Canadian Solar (NASDAQ:CSIQ), LDK Solar (NYSE:LDK), and JA Solar (NASDAQ:JASO) made it to the top 25 most overbought China stocks. China Unicom (NYSE:CHU) has ran out of steam, as expected after being overbought last week. Resurgence of NetEase.com Inc. (NASDAQ:NTES) is good news for the rest of the sector - expect some pick up from Ctrip.com (NASDAQ:CTRP) and Home Inns & Hotels Management (NASDASQ:HMIN).

 

Silvercorp Metals (NYSE:SVM), New Oriental Education & Tech. Group Inc. (NYSE:EDU) and China Southern Airlines (NYSE:ZNH) are stocks of interest on the oversold screen.

Chinese solars have got a lot of love lately as earnings season approaches. Not only do investors see solar attractive on valuation but high energy prices make the sector economically more viable. Downside risk is the highest for  Solarfun Power Holdings (NASDAQ:SOLF) and Trina Solar (NYSE:TSL), according to the overbought chart below.

More upside is possible for Yingli Green Energy (NYSE:YGE), Canadian Solar (NASDAQ:CSIQ), LDK Solar (NYSE:LDK), and JA Solar (NASDAQ:JASO), for these stock have not reached theoretical highs yet.

More about the ups and downs of the solar sector, read Why Chinese solars can't get love?

China XD Plastics (NASDAQ:CXDC) is riding on the back of investors' interest for industrials. The stock is getting overbought but may extend current rally.

China Unicom (NYSE:CHU) announced a stock swap with Telefonica, worth $500 million. Now that short-term buying interest is gone, the stock may continue to trade water.

NetEase.com inc. (NASDAQ:NTES) has shown significant momentum. Despite recent surge, the stock is far from overbought, leaving more room to the upside.

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Silvercorp Metals (NYSE:SVM) is almost oversold though more downside is possible. New Oriental Education & Tech. Group Inc. (NYSE:EDU) fell on fundamentals, suggesting a bounce back is not imminent.

There is a higher level of confidence among investors that China Southern Airlines (NYSE:ZNH) will bounce back as ZNH is about to report a record profitability. When fundamentals are strong, bears will have to loose their grip sooner than later.

OS_2011125

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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