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China stock extremes on the move, March 18

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eye March 18, 2011 (Chinavestor) There is no overbought China stock at the moment. Selected solar stocks continue to show momentum such as Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP) or Yingli Green Energy (NYSE:YGE). But most of the action took place on the oversold end of the China stock universe. Allegations of financials wrongdoings crushed shares of China Integrated Energy (NASDAQ:CBEH) to a point where the oversold indicator wes unable to detect it. China Green Agriculture (NYSE:CGA), Spreadtrum Communications (NASDAQ:SPRD) and Wonder Auto Technologies (NASDAQ:WATG) are also hurt and are extremely oversold. Stocks with unusual sharp drop include Melco Crown Technology (NASDAQ:MPEL), Fuqi International (NASDAQ:FUQI) and Guangshen Rail (NYSE:GSH).

The nuclear threat helped push Chinese solar stocks higher, as the overbought monitor testifies. Trina Solar (NYSE:TSL) is closest to theoretical highs from the group but is far from trading at extremes. More upside is possible for Suntech Power (NYSE:STP) and Yingli Green Energy (NYSE:YGE) as well.

WSP Holdings (NYSE:WH) and UTI Starcom (NASDAQ:UTSI) have notable momenum with no limit to the upside yet.

OB_2011318

A lawsuit alleging China Integrated Energy (NASDAQ:CBEH) of financial wrongdoings sent its shares tumbling 254% on Thursday. If history is to provide guidance, more downside is on the way....

China Green Agriculture (NYSE:CGA), another volatile play, became extremely oversold. Spreadtrum Communications (NASDAQ:SPRD) and Wonder Auto Technologies (NASDAQ:WATG) are just as close to theoretical lows, suggesting the bottom may be near.

Another set of extreme oversold stocks are those that fell too hard, too much. This is the case with  Melco Crown Technology (NASDAQ:MPEL), Fuqi International (NASDAQ:FUQI) and Guangshen Rail (NYSE:GSH). These stocks haven't reached theoretical lows yet but may take a break right here, something investors may want to consider.

OS_2011318

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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