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China stock extremes to watch on Feb. 10

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insurance February 10, 2011 (Chinavestor)  With no overbought China stock to speak of, technically speaking, investors pay attention to stocks with unusual momentum. Global Sources (NASDAQ:GSOL), Shanda Interactive (NASDAQ:SNDA) and China Precision Steel Co. (NASDAQ:CPSL) stock out of the crowd on the overbought screen.

Interestingly though, the oversold screen is full of action despite a multi year high for the DJIA. Large cap CNOOC Ltd. (NYSE:CEO) and China Mobile (NYSE:CHL) have reached theoretical lows along with eLong inc.  (NASDAQ:LONG) and New Oriental Education & Tech. (NYSE:EDU). The bottom is near for these stocks, according to the oversold chart. Unusual drop of ChinaCast Education (NASDAQ:CAST) and online gamer Perfect World  (NASDAQ:PWRD) suggests the fall is about to end.

Back to the overbought screen.  Yesterday's most overbought stocks, Mindray Medical (NYSE:MR) and Global Sources (NASDAQ:GSOL), surrendered some of their gains. Mindray Medical (NYSE:MR) looks to have a better position and higher chance to resume inching higher.

Shanda Interactive (NASDAQ:SNDA) has been creeping higher for the week with some acceleration into Wednesday. More upside is possible for the stock hasn't reached theoretical highs yet.

China Precision Steel Co. (NASDAQ:CPSL) has surged over 20% for the week but that's not that extraordinary for this volatile, small cap China stock. More upside is possible albeit downside risk is clearly on the rise!

OB_2011210

The oversold indicator presents large cap CNOOC Ltd. (NYSE:CEO) as the most extreme stock on this scale. With falling oil prices the decline may extend for a day or two but the stock offers a turnaround opportunity for the risky investor.

China Mobile (NYSE:CHL) is another stock that fell unusually hard. But this creates opportunity for the intelligent investor, betting on the return of bargain hunters. But that may have to wait until overall market sentiment improves. More downside is possible for the stock in the short run.

Volatile eLong inc.  (NASDAQ:LONG) and New Oriental Education & Tech. (NYSE:EDU) may bounce back up, according to the oversold screen below.

Online gamer Perfect World (NASDAQ:PWRD) fell hard while investors snapped up shares of rival Shanda Interactive (NASDAQ:SNDA). There has been an awful lot of rotation within the sector - with Changyou.com Ltd. (NASDAQ:CYOU) advancing the most lately. More downside is possible for Perfect World (NASDAQ:PWRD) but that just creates opportunity for the smart investor.

OS_2011210

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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