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China internet stocks feel Google's pinch

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decline_8 April 15, 2011 (Chinavestor) Momentum for Chinese internet stocks may run dry after Google's disappointing quarterly report. Baidu.com Inc. (NASDAQ:BIDU) is going to feel the pinch the most. Sina Corp. (NASDAQ:SINA) is vulnerable to a weakness in the internet sector along with Sohu.com Inc. (NASDAQ:SOHU) and NetEase.com Inc. (NASDAQ:NTES), according to the overbought monitor.

The good news is that Focus Media Holdings (NASDAQ:FMCN) and China Unicom (NYSE:CHU) hasn't reached theoretical highs, leaving room to the upside.

The number of oversold stocks is clearly on the rise. China TechFaith Wireless (NASDAQ:CNTE), Yucheng Technologies Ltd. (NASDAQ:YTEC) and Xinyuan Real Estate Co., Ltd. (NYSE:XIN) are stocks with limited downside risk, according to the oversold monitor.

Investors have to realize that low volume Noah Education (NYSE:NED) and WSP Holdings (NYSE:WH) render technical indicators inaccurate, including the overbought monitor.

Baidu.com Inc. (NASDAQ:BIDU) is clearly trading above its trading range this morning. The stock is not trading at extremes though, making it somewhat safe from the Google fallout.

Sina Corp. (NASDAQ:SINA) looks similar to Baidu.com Inc. (NASDAQ:BIDU).Both stocks are trading at next to all time highs but one has to wonder how long such advance can last.

Sohu.com Inc. (NASDAQ:SOHU) is another company with exposure to the search engine market. NetEase.com Inc. (NASDAQ:NTES) and Sohu.Com Inc. (NASDAQ:SOHU) have been correlating closely with internet giants, a trend that is likely to continue. If that's the case, short term outlook for these stocks is not all that bright.

Stocks with sound momentum include Focus Media Holdings (NASDAQ:FMCN) and China Unicom (NYSE:CHU). While both stocks have advanced rapidly, none are trading at extremes yet.

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There has been a lot of action on the oversold monitor lately. China TechFaith Wireless (NASDAQ:CNTE) is the most oversold China stock at the moment followed closely by Yucheng Technologies Ltd. (NASDAQ:YTEC) and Xinyuan Real Estate Co., Ltd. (NYSE:XIN). While it's hard to say when/if these companies are going to bounce back up, one things looks more certain: downside risk is low for these beat up stocks.

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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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