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Larger internet names are safe heaven among Chinese stocks

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economy2 March 15, 2011 (Chinavestor) There is not much happening on the overbought China stock universe other than Sina Corp. (NASDAQ:SINA) and WSP Holding (NYSE:WH) surprising to the upside. Liquid internet stocks, like Baidu.com (NASDSQ:BIDU), were able to hang on to gains as investors found refuge in liquid names. But smaller names fell apart, led by Fushi Copperweld (NASDAQ:FSIN) and Spreadtrum Communications (NASDAQ:SPRD). Harbin Electric (NASDAQ:HRBN) and CNinsure Inc. (NASDAQ:CISG) suffered heavy losses as well. Qiao Xing Mobile Communication Co., Ltd (NYSE:QXM) and Qiao Xing Universal Resources, Inc (NASDAQ:XING) continued to deteriorate and became oversold.

But oversold won't necessarily translate to a quick bounce back during uncertain times like these. The market remains on the edge as headlines from Japan hit the wires. It looks that larger, liquid stocks remain resilient but smaller counterparts continue to hurt.

Sina Corp. (NASDAQ:SINA) just hit a new all time high on Monday, while Baidu.com (NASDAQ:BIDU) or Sohu Corp. (NASDAQ:SOHU) went sideways. WSP Holding (NYSE:WH) jumped seven percent in a surprise move, but lower volume makes it less significant. And this completes the overbought end of the China stock universe for today because most of the action is taking place on the oversold end.

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Fushi Copperweld (NASDAQ:FSIN) suffered an analyst downgrade and fell 7.8%. The stock is just as oversold as Spreadtrum Communications (NASDAQ:SPRD). Both have reached theoretical lows but a turn around may have to wait until overall market sentiment changes.

Harbin Electric (NASDAQ:HRBN) and CNinsure Inc. (NASDAQ:CISG) are new additions to the oversold screen. Both stocks are trading well below their trading envelope, a notable development. Qiao Xing Mobile Communication Co., Ltd (NYSE:QXM) and Qiao Xing Universal Resources, Inc (NASDAQ:XING) have reached theoretical lows but investors will continue to shun these risky assets, at least for now.

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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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