February 28, 2011 (Chinavestor) Oversold Chinese stocks present the most trading opportunities for Monday, according to the two chart below. WuXi Pharmatech (NYSE:WX) and Longtop Financial (NYSE:LFC) may be trading the closest to theoretical lows but they aren't the only interesting stock to follow for Monday. Large cap China Southern Airlines (NYSE:ZNH) and Guangshen Railway (NYSE:GSH) are considered oversold. China Eastern Airlines (NYSE:CEA) is going to benefit from the advance of the industry leader. Optimism may carry over to Origin Agritech (SEED) and E-House Holdings (NYSE:EJ) but it's gong to be earnings that will ultimately move some of the stock for today. Downside risk exceeds upside potential for overbought Ata Inc. (NASDAQ:ATAI) - to pick the most interesting stock from that part of the China stock universe.
But again, oversold large caps are positioned well to bounce back up. Guangshen Railway Co. Ltd. (NYSE:GSH) and China Southern Airlines (NYSE:ZNH) are trading close to theoretical lows after a substantial slide last week. Both stocks are ready for a bounce back. China Eastern Airlines (NYSE:CEA), the second largest Chinese carrier, is going to follow larger rival higher, if the oversold monitor proves to be accurate today.
Downside looks limited for WuXi Phamratech (NYSE:WX) and Longtop Financial (NYSE:LFC), according to the oversold monitor below. But don't bet on a quick bounce back up just yet.
Origin Agritech (NASDAQ:SEED) and E-House Holdings (NYSE:EJ) are stocks of interest as well. Both stocks are highly liquid and thus follow overall momentum closely. Swing traders better pay attention to both of these stocks.
Ata Inc. (NASDAQ:ATAI) is the only stock trading at extremes on the overbought monitor this morning. But that is about to change as outlook for large cap Chinese stocks is good this morning not to mention the large number of earnings announcement that's schedule for today and the rest of the week. Volatility is coming back, investor!
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.