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China stock extremes for March 1

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telescope1 March 1, 2011 (Chinavestor) Ata Inc. (NASDAQ:ATAI) continues to defy the overbought chart. Other notable stocks from the overbought screen include NetEase.com Inc. (NASDAQ:NTES), Huaneng Power (NYSE:HNP) and Global Sources (NASDAQ:GSOL).

Oversold screen improved substantially from Monday yet some stocks still offer opportunities. WuXi PharmaTech (Cayman) Inc. (NYSE:WX) is oversold with Cogo Group (NASDAQ:COGO) right on its heels. Significant loss of momentum is seen at Origin Agritech (NASDAQ:SEED) and 3SBio (NASDAQ:SSRX).

Ata Inc. (NASDAQ:ATAI) has approached theoretical highs but doesn't seem slowing down. The company reported better than expected quarterly results and got a major analyst upgrade in return. The stock is up 5 days in a row but may extend rally should overall market sentiment remain at least neutral.

NetEase.com Inc. (NASDAQ:NTES), another company with solid earnings, has gone higher with more upside on the way. The stock is far from theoretical highs, leaving more room to the upside.

The overbought screen caught unusual momentum for large cap Huaneng Power (NYSE:HNP). More upside is possible, according to the following chart.

 

OB_201131

The bottom is near for WuXi PharmaTech (Cayman) Inc. (NYSE:WX), according to the oversold screen below. The stock has reached theoretical lows, a sign that downside risk is low.

Cogo Group (NASDAQ:COGO) is almost oversold, minimizing downside risk as well. But WX looks to have a much higher chance of a quick turnaround at this time.

Origin Agritech (NASDAQ:SEED) and 3SBio (NASDAQ:SSRX) are seen as stocks with a loss of momentum. This is a two edged sword than can cut both ways. While downside risk is less after the fall, the stocks haven't reached theoretical lows yet. Nevertheless investors better pay attention to their developing stories. 

OS_201131

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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