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China stock extremes on April 11

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banace_4 April 11, 2011 (Chinavestor) The iPhone continues to power China Unicom (NYSE:CHU) albeit downside risk is on the rise. Momentum was strong for Ctrip.com Inc. (NASDAQ:CTRP) and New Oriental Education (NYSE:EDU) last week but are trading way above their trading range on Monday. Jinpan International (NASDAQ:JST) is a light volume stock that is in the danger zone as well, according to the overbought chart. China Automotive Systems (NASDAQ:CAAS) surged over 30% last Friday as sales topped forecast and strong underlying volume may keep the stock going on Monday.

Stocks of interest on the oversold chart include Puda Coal (NASDAQ:PUDA), Feihe International (NYSE:ADY) and Qiao Xing Mobile Communication Co., Ltd (NYSE:QXM).

Back to the overbought chart. China Unicom (NYSE:CHU) may seems like ready to fall on profit taking, but large caps like CHU can extend a rally into a few more days. While downside risk is clearly on the rise, more upside is a real possibility on Monday.

Stocks stepping out of their trading range include Ctrip.com Inc. (NASDAQ:CTRP) and New Oriental Education (NYSE:EDU). Both stocks are vulnerable and may fall should overall market sentiment weaken.

Jinpan International (NASDAQ:JST) may look overbought but low volume renders that overbought indicator less accurate. Nevertheless the 8.7% advance last week is unusual for the stock and thus might fall on overall market weakness on Monday.

China Automotive Systems (NASDAQ:CAAS) rocked the boat last Frinday after reporting better than expected 2010 Q4 sales figures. Experience has taught us that when fundamentals are moving a stock, technical indicators are less useful. That's why we don't have China Automotive Systems (NASDAQ:CAAS) listed on the overbought screen.

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Stocks with the most dramatic decline include Puda Coal (NASDAQ:PUDA), Feihe International (NYSE:ADY) and Qiao Xing Mobile Communication Co., Ltd (NYSE:QXM) from last week. The bad news is that despite a sizable fall, all these stocks have more downside left. Puda Coal (NASDAQ:PUDA) may get a boost from high energy prices though, but not from the technical reading.

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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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