April 19, 2011 (Chinavestor) Shanda Interactive (NASDAQ:SNDA) caught fire after a similar rally of its online game unit, Shanda Game (NASDAQ:GAME), a day before. The overbought monitor picked up the unusual advance of Sina Corp. (NASDAQ:SINA), stock that rose 8.5% to another new all time high. China Fire & Security (NASDAQ:CFSG) and Melco Crown Entertainment (NASDAQ:MPEL) are also stocks of interest on the screen below.
Investors embraced online game giant Shanda Interactive (NASDAQ:SNDA) on Monday, lifting its shares up 17% for the day. This was a similar run to that of Shanda Games (NASDAQ:GAME), a company that was once the industry leader. Both stocks have advanced very fast but have more upside left, according to the overbought monitor.
One has to wonder where the ceiling may be for Sina Corp. (NASDAQ:SINA). Shares of the company rose to a new all time high after an over $10 jump on Monday. The stock is clearly trading above its trading range and looks vulnerable to negative market sentiment.
Downside risk is on the rise for China Fire & Security (NASDAQ:CFSG) and Melco Crown Entertainment (NASDAQ:MEPL) as well. None of these stocks have reached theoretical highs yet but the pace of advance looks excessive.
Focus Media Holdings (NASDAQ:FMCN) is on the top of the most overbought China stock list but looks to have more upside potential left.
Chinese resource stocks, Aluminum Corp. of China (NYSE:ACH) and General Steel (NYSE:GSI), are not oversold yet, suggesting more downside is possible. At this point there is not a single China ADR that is oversold to the extremes technically speaking.
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.