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China stock extremes and trading opportunities

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buy-sell March 11, 2011 (Chinavestor) With so much selling in the past few days, the oversold indicator is the most interesting to watch today. Stocks of interest for Friday include Canadian Solar (NASDAQ:CSIQ), China Sunergy (NASDAQ:CSIQ), Zhongpin Inc. (NASDAQ:HOGS), and The9 Ltd. (NASDAQ:NCTY), just to name a few. These stocks have relatively healthy volume and might bounce back up on due course.

Stocks of interest on the overbought screen include Sina Corp. (NASDAQ:SINA), Shanda Interactive (NASDAQ:SNDA) and Focus Media Holdings (NASDAQ:FMCN).

Back to the oversold screen. Canadian Solar (NASDAQ:CSIQ) touched extreme oversold position on Thursday, indicating the bottom is near. China Sunergy (NASDAQ:CSIQ) fell hard as well, as most Chinese solar companies did on Thursday. But the sector has attracted a lot of interest and might get back on its feet as soon as events in Libya come to rest.

Zhongpin Inc. (NASDAQ:HOGS) is another liquid stock trading at extremes. Oversold is not necessarily bullish but suggests the stock fell too hard, too much and might bounce back.

The9 Ltd. (NASDAQ:NCTY) is nother stock that fell to thoeretical lows, a development seasoned investors better follow.

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Shanda Games (NASDAQ:GAME) was able to hang on to previous gains despite a steep fall of all U.S> indices on Thursday. Its mother company, Shanda Interactive (NASDAQ:SNDA) is not overbought but has risen on the back of sound Q4 numbers. Should market sentiment improve, these stocks have more upside.

Sina Corp. (NASDAQ:SINA) is another internet stock that looks well positioned to take advantage of a market turn around.

Focus Media Holdings (NASDAQ:FMCN) has been erratic with significant gains amid high volume. These are very positive signs, suggesting more upside is possible here as well.

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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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