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China stocks with momentum February 8

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statistics_2 February 8, 2011 (Chinavestor) Despite a sound day for U.S. equities and the multi year high for the DJIA, Chinese stocks failed to gain traction on Monday. This limited the number of stock extremes to a handful of stocks. Mindray Medical (NYSE:MR) remains on the top spot on the overbought China stock screen but has moved away from theoretical highs. The overbought monitor picked up the unusual advance of VisonChina Media Inc. (NASDAQ:VISN) besides solar play Yingli Green Energy (NYSE:YGE) and Rene Sola (NYSE:SOL). Internet giant Sina Corp. (NASDAQ:SINA) is another stock of interest. eLong Inc. (NASDAQ:LONG) dropped just shy of 10% on Monday but is oversold and ready to bounce back up.

Investors have to keep in mind that neither VisonChina Media Inc. (NASDAQ:VISN) nor solar play Yingli Green Energy (NYSE:YGE) or Rene Sola (NYSE:SOL) are overbought. These stocks are lifted out of the crowd simply by looking at their unusual momentum.

Chinese internet stocks got a boost from earnings of Baidu.com Inc. (NASDAQ:BIDU) and Sohu.com Inc. (NASDAQ:SOHU) last week, something that has moved Sina Corp. (NASDAQ:SINA). The good news is that more upside is possible for all of these stocks, according to the overbought chart below.

OB_201128

eLong Inc. (NASDAQ:LONG) is the most oversold China stock at the moment. Shares of the company fell 10% on Monday and have reached theoretical lows. This suggests the stock has more upside potential than downside risk - albeit a comeback is going to be a "dead cat bounce", most likely.

OS_201128

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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