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China stocks on the move, March 9

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narrow_range2 March 9, 2011 (Chinavestor) Despite an 11% gain on Tuesday, Shanda Games (NASDAQ:GAME) is not overbought this morning. But China Fire & Security Group, Inc. (NASDAQ:CFSG) and KongZhong Corporation (NASDAQ:KONG) have advanced too fast, too much, according to the overbought monitor below. Low volume renders the indicator useless for Noah Education (NYSE:NED).

VisionChina Media Inc (NASDAQ:VISN) is trading at oversold extremes along with China Digital TV Holding Co., Ltd. (NYSE:STV) and Air Media Group Inc. (NASDAQ:AMCN). These stocks may hit bottom sooner than later. But more downside is possible for Vanceinfo Technologies (NYSE:VIT), according to the oversold chart. Earnings continue to dominate the overbought chart. Shanda Games (NASDAQ:SNDDA) beat analyst expectations, helping lift the stock from $5 range to over $7. While the advance was swift, the stock hasn't reached theoretical highs yet, leaving more room to the upside.

Downside risk now exceeds upside potential for China Fire & Security Group, Inc. (NASDAQ:CFSG) and KongZhong Corporation (NASDAQ:KONG). Investors have to remember that overbought is not necessarily bearish but an indication that the rally may have to take a breath.

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VisionChina Media Inc (NASDAQ:VISN), China Digital TV Holding Co., Ltd. (NYSE:STV), China Edu Corp. (NASDAQ:CEDU), and Air Media Group Inc. (NASDAQ:AMCN) are very similar from a technical point of view. Given that these stocks have approached theoretical lows, downside risk looks substantially lower.

Last year's darling Vanceinfo Technologies (NYSE:VIT) fell out of favor after missing fourth quarter expectations. Despite a sizable fall, more downside is possible, according to the oversold chart below.

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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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