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China internet stocks ready to roll

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advance2 April 13, 2011 (Chinavestor) The number of China stock extremes is on the rise among oversold Chinese stocks but investors have to pay attention to China Unicom (NYSE:CHU) besides other overbought ADRs. Chinese internet stocks have been trading in a narrow range as the arrow for Baidu.com Inc. (NASDAQ:BIDU), NetEase.com (NASDAQ:NTES) and Sina Corp (NASDAQ:SINA) testifies. China Eastern Airlines (NYSE:CEA) is on the low end of the overbought chart but is expected to climb higher. General Steel (NYSE:GSI) is oversold but VisionChina Media (NASDAQ:VISN), China GrenTech (NASDAQ:GRRF) and China TechFaith Wireless (NASDAQ:CNTF) have more downside risk left, according to the oversold monitor.

WSP Holdings (NYSE:WH) is overbought but may be able to extend gains for one more day. But downside risk is clearly on the rise according to the following chart.

China Unicom (NYSE:CHU) want on to consolidate on Tuesday. This implies more upside is possible, albeit profit taking is expected to keep additional gains at bay.

Chinese internet stocks proved to be safe heaven earlier the month but now the sector is looking for direction as stock price development of Baidu.com Inc. (NASDAQ:BIDU) testifies. The slow down hurt upside for NetEase.com (NASDAQ:NTES) and Sina Corp (NASDAQ:SINA) as well. But now that these stocks established themselves at new highs, they are ready to resume going north, according to the overbought chart below.

China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) were on the roll yesterday and more upside is possible.

Mindray Medical (NYSE:MR), a Chinese medical equipment maker, is coming off lows but is still trading at the low end of its trading envelope.

OB_2011413

General Steel (NYSE:GSI) is oversold and is ready to bounce back up, along with Nam Tai Electronics (NYSE:NTE).

Despite significant losses, VisionChina Media (NASDAQ:VISN), China GrenTech (NASDAQ:GRRF) and China TechFaith Wireless (NASDAQ:CNTF) aren't out of the woods yet.

OS_2011413

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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