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China large caps on the roll, Jan 27

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advance7 January 27, 2011 (Chinavestor) Solar stocks got wiped out of the overbought screen, giving room for large cap, HKEX cross-listed blue chips. China Petroleum & Chemical Corp. (NYSE:SNP), China Unicom (NYSE:CHU) and Aluminum Corp. of China (NYSE:ACH) are overbought to the same degree, leaving room to the upside. The overbought chart picked up the unusual advance of NetEase.com Inc. (NASDAQ:NTES), boding well for the rest of the industry.

Stocks to watch on the oversold screen include China Natural Resources Inc. (NASDAQ:CHNR), GigaMedia Ltd. (NASDAQ:GIGM), China Mobile (NYSE:CHL) and Fuqi International (NASDAQ:FUQI).

The good news is that there is not a sinlge overbought China stock to speak of, technically speaking. China Petroleum & Chemical Corp. (NYSE:SNP) is looking good ahead the opening bell, just as China Unicom (NYSE:CHU) and Aluminum Corp. of China (NYSE:ACH) does. All these stocks are far from theoretical highs but have shown sustainable momentum.

NetEase.com (NASDAQ:NTES) has more upside left despite latest surge. While not on the overbought screen yet, Sohu.com (NASDAQ:SOHU) and Changyou.com Inc. (NASDAQ:CYOU) advanced over 5%  yesterday ahead of upcoming earnings on Monday. All these stocks have more upside left, according to the chart below.

OB_2011127

China Natural Resources Inc. (NASDAQ:CHNR) is closest to theoretical lows, suggesting the bottom is near.

But despite heavy losses, the worst isn't necessarily over for GigaMedia Ltd. (NASDAQ:GIGM).

The fall of China Mobile (NYSE:CHL) is unusually sharp, suggesting a modest correction is on the way.

Fuqi International (NASDAQ:FUQI) is trading below its trading envelope but hasn't approached theoretical lows yet. More downside is possible.

OS_2011127

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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