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Wall Street 12,000 vs China stock extremes

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WallStreet January 28, 2011 (Chinavestor) China unicom (NYSE:CHU) and China Petroleum & Chemical Corp. (NYSE:SNP) remain on the top of the overbought chart but are in the danger zone! Fushi Copperweld, Inc (NASDAQ:FSIN) jumped significantly albeit is far from extreme position. Chinese real estate stocks became oversold to a different degree as authorities tightened mortgages again. China Real Estate Information Corporation (NASDAQ:CRIC) fell hard just did GigaMedia (GIGM). Developing story belongs to Shanda Games (NASDAQ:GAME), WuXi PharmaTech (Cayman) Inc (NYSE:WX), and JA Solar (NASDAQ:JASO) on the oversold screen.

China Unicom (NYSE:CHU) is the stock to watch among extremes on the overbought chart. While the stock hasn't reached theoretical highs yet, the indicator raises a red flag. Large cap stocks don't usually get overbought to the extreme. China Petroleum & Chemical Corp. (NYSE:SNP) is another stock where downside risk exceeds upside potential.

Fushi Copperweld, Inc (NASDAQ:FSIN) appointed KPMG, one of the big four, to audit its books. The stock made a modest advance with more upside potential.

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China Real Estate Information Corporation (NASDAQ:CRIC) has approached theoretical lows and may bottom out. But considering the reason for the drop, e.g. raising downpayment for second mortgages, the decline looks justified.

Shanda Games (NASDAQ:GAME) fell to the low end of its trading range - an opposite of what NetEase.com inc. (NASDAQ:NTES) has been doing lately.

Despite latest losses, more downside is possible for WuXi PharmaTech (Cayman) Inc (NYSE:WX), and JA Solar (NASDAQ:JASO), according to the oversold screen.

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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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